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THE 



METHODS AND MACHINERY 



OF 



PRACTICAL BANKING, 



CLAUDIUS B: PATTEN, 

Late Cashier of the State National Bank, of Boston, Mass. 






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REPRINTED FROM 



RHODES' JOURNAL OF BANKING 



AND CAREFULLY ME VISED AND ARRANGED. 



1891: 
BRADFORD RHODES & COMPANY, 

78 William Street, 
NEW YORK. 



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"A chield's amang you taking notes. 
And faith, he'll prent it." 

— Burnt. 



Copyright, 1891. 

BRADFORD RHODES tfc COMrANT. 

. I /./ rights reserved. 



INTRODUCTOKY. 



A VALUABLE Text-Book must be written by one who is a con- 
scientious student of the subject treated, and who has himself 
had practical experience of the requirements of the school where his 
book is to be used as a guide. He must also have the faculty of 
expression, the ability to make his meaning clear and easily under- 
stood. As a rule, bankers are men of affairs ; they drive ahead in the 
path of daily work and worry, and let others write books. 

Mr. Claudius B. Patten, the author of this volume, was a born 
banker. He loved his profession and sought continually to formulate 
better and safer methods in the transaction of the banking business. 
He realized that a good business man is never too old or too smart to 
learn. The judgment of the officer or clerk who claimed to ' ' know it 
all " he regarded with a just distrust. The knowledge he had himself 
acquired he was always willing to impart to others. Selfishness had 
no place in his nature, and he was opposed to taking out a patent on a 
new idea and putting it under lock and key in his own bank. It will 
be a hopeful sign when bank managers can look beyond the confines 
of their own counting-rooms and cultivate a spirit of fraternity and 
helpfulness toward others engaged in the same business. A well- 
managed bank to-day is a cog in the great wheel of business activity ; 
if its management is selfish and narrow, without the appropriate 
adaptation to the other cogs necessary to maintain the symmetry of 
the wheel, it causes a grating and wearing of the spindle, and so 
increases its own chances of being removed for repairs. 

Born in Kingston, New Hampshire, April 7, 1828, Mr. Patten was 
of a highly respected family. When a young man he went to Boston 
and readily secured employment, at once making himself noticeably 
useful to his employers. His manners and habits were such that he 
rapidly made friends, through whose influence he eventually secured 
the position of junior clerk in the Suffolk Bank. He remained with 
that institution for nearly twenty years, steadily rising to the position 
of Assistant Cashier. This he held until 1867, when he resigned to 
become Cashier of the State National Bank of Boston. 

Mr. Patten was enthusiastic in regard to the business of banking 
and carefully educated himself in all its branches. He could take up 



IV. INTRODUCTORY. 

the work of a clerk on a moment's notice, aid him to discover an 
error and took pleasure in showing him how to shorten his work by 
improved methods of conducting it, and was constantly in touch with 
every department of his own bank. Though kindly appreciative 
of the work of clerks in subordinate positions, he was rigid in the 
requirement of faithful service. 

It was while he was with the Suffolk Bank he conceived the 
idea and laid the foundation of his book, which may be fitly termed 
his legacy to the banking world — his Methods and Machinery of 
Practical Banking. This work is therefore the embodiment of a 
long-cherished plan for furnishing practical information to bankers and 
to the large number of young men who, as junior officers and clerks, are 
ambitiously struggling to fit themselves for higher positions. The 
author fully realized the difficulties lying in the path to promotion. 
His own experiences, as recited in these pages, will show how his heart 
went out to those in like situations, and how earnestly he desired to 
benefit them by his own example. Of him it can truly be said, he 
practised what he preached. 

This volume is the beneficent outcome of over twenty years' practical 
experience in a banking institution ranking in financial history as 
one of the foundation stones of sound banking in the United States, 
supplemented by patient study of better methods in later years. 

Outside of his bank work Mr. Patten was a close observer of affairs. 
In 1884 he took a much needed vacation by going abroad. In 
company with his young son he walked through England— the best 
possible way of seeing any country. He took notes by the way, and 
on his return wrote ' k England as Seen by an American Banker ; Notes 
of a Pedestrian Tour" — a charming record of English manners and 
customs. The volume furnishes ample disproof of the popular belief 
that the only book the banker knows anything about is an account 
book. The dedication is in Mr. Patten's happy style ; here it is : 

1 ' To the English People, in hall and cottage, in city or country, 
who so cheerfully responded to all my inquiries ; and to MY twelve- 
year-old son, the companion of my travels, whose familiar presence 
made all lands home to me, this volume is cordially inscribed. " 

Mr. Patten was a genial, whole-souled man, one of nature's noble- 
men, whose unexpected and untimely demise was mourned not only 
by his immediate friends and acquaintances, but by the entire banking 
community in which he had, for a long time, played so prominent a 
part. The direct cause of his death was over-work. He died at 
Boston, May 22, 1886. The papers collected in the present work began 
in Rhodes' Journal of Banking in August, 1884, and were continued, 



INTRODUCTORY. V. 

with some interruption (owing to the author's illness) until 1887. Before 
his last illness Mr. Patten had completed the Practical Banking series. 

It is especially fortunate that Mr. George B. Warren, Mr. Patten's 
successor in the State National Bank of Boston, has been so kind as to 
collate and revise the papers for publication in book form. He was 
associated with the author for over twenty years, was in sympathy 
with his plans and understood his wishes regarding the publication 
of this volume. 

The portrait of the author presented herein gives an imperfect idea 
of his personal appearance. The picture was engraved from a small 
photograph taken by an amateur in a remote New Hampshire village 
where Mr. Patten spent his summer vacation a few years ago. It is 
the only recent photograph of him in existence. 

No work performed by the writer in a somewhat busy life has 

produced more hopeful anticipation than the preparation of this book 

for the press. It is gratefully inscribed to the memory of its gifted 

author, with the firm belief that it will receive a cordial welcome from 

bank officers and clerks of every grade, and from all others interested 

in banking progress. Bradford Rhodes. 

Office of the Journal of Banking, I 
January, 1891. > 



*CO]SrTEE"TS. 



CHAPTERS. 

I.— THE BANK CLERK AND HIS PROFESSION. 

Introductory— his education — promptness— faithfulness— must be good natured— 
have a high standard. 

II.— THE PAYING-TELLER AND HIS CASH. 

Form of his book— receipting for payment of check— paying part of check—" good 
when properly indorsed " — count your money— checks presented after drawer is 
dead — money found outside the counter — inside and outside the grating — tellers 
as detectives — about raised checks — when teller is short — mutilated and counterfeit 
money — branding worthless notes. 

in.— THE RECEIVING-TELLER AND THE DEPOSITORS. 

Form of his book — all about pass-books — a London bank pass-book. 

IV.— THE BOOK-KEEPER'S DESK. 

flow to keep his books — how condition of bank is shown — handling cancelled checks 
— how to make out report to Comptroller — the Skeleton Ledger, with correctly 
ruled and printed form (in appendix). 

V.— THE COLLECTION DEPARTMENT AND MESSENGER. 

Note covers — collection record — notifying parties — cashier's notice in old times — 
messenger's duties— why drawee would not pay draft — perishable property — 
drawee's place of business — "in exchange " and " with exchange "—paying money 
back — what time in the day is note due — paying by check—" tramp " collections 
— collection systems contrasted. 

VI.— THE BANK'S NOTARY AND PROTESTING. 

Bank's responsibility for notary's work — how to protest — when draft is sent by express 
— protesting joint note — no residence or business place — used to being protested. 

VII.— THE DISCOUNT CLERK AND THE LOAN. 

Discount clerk's responsibility — memorandums and tickets— taking care of notes — 
how to reckon interest — ownership marks — rates to depositors — collateral notes 
with form — buying paper — responsibility of broker — accommodation and business 
paper — " manufactured " paper— other kinds of paper— a safeguard — when bank's 
reserve is not up. 

VIII.— THE BANK'S COLLATERALS. 

How to file them — responsibility for collaterals — sample of ancient form of collateral 

note. 

IX.— BONDS AND COUPONS. 
Destroyed bonds — how to collect money for — stopping payment of— handling coupons 

— a bad practice described. 



* A complete topical Index appears in the back part of this volume. 



Vlll. CONTENTS. 

X.— THE CASHIER AND HIS DUTIES. 

His responsibility — relation between president and cashier — special duties — signature 
— bank's correspondence — cashier's record — daily memorandum — agenda and 
scrap book — valuable hints about paying dividends. 

XI.— THE STOCK— ITS OWNERSHIP AND TRANSFER. 

Stock certificate book — how to transfer stock — probate court experience — estates of 
non-residents — how treasurer tried to transfer shares — when person is dead — lost 
certificates — when shareholders' names are changed. 

XII.— THE BANK'S CIRCULATION. 

Circulation record — stolen notes — redeeming mutilated bills — about fragments of bills 
— when bills are lost — over-issues — workings of redemption bureau. 

XIII.— THE MAIL AND TELEGRAPH. 

Use both judiciously — letter record — registered letters — how to use the wires — certify- 
ing by telegraph — wiring money— cipher telegrams. 

XIV.— EXCHANGE AND LETTER OF CREDIT. 

What is meant by exchange and how it works — what a letter of credit is — how used 
— identification unnecessary — experience of the author. 

XV.— A CHAPTER ON CHECKS. 

What a check is — how to draw checks— how to treat errors in — issuing duplicates — 
guarantee of — certificates of deposit— treasurer's endorsement — good and bad 
forms — stopping payment of checks — cancelling checks. 

XVI.— NOTES AND DRAFTS. 

What they are— how to write them— their important features. 

XVII.— THE PRESIDENT AND DIRECTORS. 

Duties and responsibilities — meetings of — selecting directors — some types of bank 
presidents — president's endorsement. 

XVIII.— SOME WORDS ON MANAGEMENT. 

Business mens' moods — strangers — bank doctor — banking conveniences — overworking 
officers — the salary question — marriage of clerks — vacations — banking hours — 
curious petition of Boston bank clerks — lunch in bank — bank's attorney — the bank 
examiner — defalcations— Sunday work — not a model bank. 

XIX.— ON PERSONAL MATTERS. 

Courtesy a necessity — employing leisure time — handwriting — signatures— pen paralysis 
— death of officer — officers' residence — clerks' investments — bank secrets — clerks' 
studies. 

XX.— BUSINESS AND PLEASURE. 
Rusty clerks— bankers' institutes — how to spend vacations. 

XXI.— BONDS OF SURETYSHIP. 

Their moral value — about fidelity companies — taking the oath — extended banks- 
renewal of officers' bonds not necessary. 

XXII.— COMMONPLACE CARES. 

Locating banking rooms— internal arrangement— waste paper— locks and vaults— old 
books and papers. 



CONTENTS. IX. 

XXIII.— THE CLEARING-HOUSE SYSTEM. 

Its workings described— loans between banks — dishonored checks — personal expe- 
rience — how returns are made. 

XXIV.— OUR ENGLISH COUSINS. 

Banking in England — open and crossed checks — starting a bank in London — profits- 
of English banks. 

XXV.— TRUST COMPANIES. 
Description and practical workings of. 

XXVI.— THE SUFFOLK BANK SYSTEM. 

What it was and how it worked — personal reminiscences of author. 

XXVII.— EVERYDAY QUESTIONS AND OTHER MATTERS. 

The charity question— small accounts — special deposits — disclosing account of depos- 
itor—ink responsibility — a legal signature — signing by mark— use of banking 
terms— women in banking— identification— in times of panic — banks and clergy- 
men—amusement question— Canadian banking. 

SUPPLEMENTAL CHAPTERS. 

*XXVHL— INSIDE WORKINGS OF A BANK. 

How to make examinations and know they are correct — a quick method of discovering 
crooked book-keeping— tellers' differences and how to remedy them— journal 
entries and charge tickets — best method of opening ledgers, with ruled and 
printed form showing how to do it — stopped checks and how to handle them, etc. 

XXIX.— LAWFUL-MONEY RESERVE OF NATIONAL BANKS. 

Complete tables and examples showing how reserve is computed — funds available- 
for reserve under the law now in force. 

XXX.— A CHAPTER ON SIGNATURES. 

How some bank officers write their names (with fac similes) — blind signatures and 
plain writing contrasted — forgery prevented. 



APPENDIX. 

Form of the "Skeleton Ledger." Blank Report sent to National banks by the 
Comptroller of the Currency. 



♦Note.— Chapter XXVIII comprises a series of articles written by Mr. James G.. 
Cannon, Vice-President of the Fourth National Bank, of New York, and which have 
already been published in Rhodes' Journal of Banking. Mr. Cannon's many 
years' experience and thorough familiarity with the subjects treated render his 
contribution a fit supplement to Mr. Patten's work. 



PEACTICAL BA2TKIS"G. 



CHAPTER I. 

THE BANE CLERK AND HIS PROFESSION. 

THERE are many aspects of this matter of Banking as a profession 
which deserve attention in such a work as this and any proper 
treatment of this topic must command the consideration of all readers 
who are in the banking business or who have thoughts of entering it. 

It is often urged as an argument against positions in banks that 
there are few such that afford proper scope for the natural ambition of 
a lively and intelligent young man. 

I doubt not that this argument has been given undue weight from 
the very fact that many rather unintelligent and unlively young men 
have entered banks and, as a matter of course, remained there in a 
very stagnant and unprogressive way of life, learning little or nothing 
that was not within the direct scope of their special duties, and, as a. 
consequence, never receiving promotion or advancement. It should be 
remembered that force, ability and faithfulness tell as well in banking 
as in the average business situations of the period, and that traits and 
conduct of the opposite character are as fatal there as elsewhere. 

Some of the best bankers in the United States to-day are men who 
have passed rapidly through every minor office in banks. The names of 
many of them would have a familiar sound were they mentioned here, 
though the younger generation of bankers are living so far from the 
time when these prominent bank managers were serving as Messengers, 
Tellers, etc. , that any statement that they were once on the low rounds 
of the bank ladder would be news to the young men. 

Then we hear objections on the score of health but there are no 
good reasons for deeming the bank officer's position particularly 
unattractive on account of its unhealthfulness. He leads, to be sure,, 
so far as his daily routine of work is concerned, rather a cramped and 
confined mode of life, and his position is open to the objection that it 
involves, at times, heavy mental strains. The bank officer also labors 
under the disadvantage of being at a sort of work which is extremely 
irregular in its character. 

Every bank which is properly managed has to carry along a staff 
sufficiently strong to do its work promptly and well in times when its 
work is the largest and most pressing, for dealers cannot wait. Each 
day's work must be done in that day, and the right kind of extra help 



2 PRACTICAL BAXKIXG. 

cannot be summoned at a moment's warning. As a consequence there 
are days in active banks when its officers are overworked, and days 
when the hours drag heavily because there is so little to do. 

This spasmodic and irregular character of bank work is a decided 
objection to it. Yet all these features which I have described as 
belonging to labor at the desk or counter of a banking institution are 
apt to exist in positions connected with general business. The counting- 
house of the merchant and the salesrooms of the dry goods jobbers 
and the grocers present about the same class of drawbacks. 

All sorts of business have their shady and their sunny sides, and 
one of the relieving features of banking is found in the fact that its 
workers have, as a general thing, more time to themselves than clerks 
and business men in the other occupations I have named. 

And, if bank officers will properly improve their out-of-bank hours, 
there are no reasons why they cannot get along comfortably enough 
with the share of confinement which is their daily lot. It should be 
evident enough to them that they should, when away from the bank, 
shun as far as practicable a continuance of sedentary life. They 
should seek out-of-door work and recreations, should avoid late hours 
in confined halls and rooms, should not over-read or over-study, 
should cultivate pleasant society, and should have innocent hobbies 
which divert the mind from business care and thoughts. 

If such methods of using the time outside the bank can be main- 
tained they will effectually dispose of any objection to banking as 
unhealthful. 

Again, men often say they do not like corporation service of any 
sort, since in it there is little opportunity for ''individual independence 
in conduct or self-reliant assertion. " They claim that, in positions of 
this character, a certain routine of movement is marked out for 
employees, of all grades, and that there are few opportunities, and 
little encouragement, for independent, discretionary action. There is 
in all this, it is said, a narrowing and belittling of true manliness and 
vigor of character, which tendency constitutes the real shady side of 
the business. 

While I have quoted this objection as applying to all corporation 
employment we are only interested in its bearing on clerks in banking 
institutions. 

We must admit that in all well-regulated banks where many officers 
of various grades are employed there must prevail an orderly discipline 
and subordination. 

As in military service there are Generals, Colonels and Lieutenant- 
( lolonels, here there are Presidents, Cashiers and junior officers — Tellers, 
Book-keepers and Clerks of different departments. The President, if 
lif Lb a working President and the responsible head of the bank, must 
b • Berved as Buch by all officers under him — must receive from them 
unquestioning service where no sacrifice of principle is concerned. The 



THE BANK CLERK AND HIS PROFESSION. 3 

Cashier, who is the executive officer of the bank, must receive similar 
service from those under him. 

Outside and beyond all this way of bank life lies what may be 
termed a higher individual life and character. 

In one sense all the officers of whom I have spoken are subordinate. 
The President is, in a measure, subordinate to the Directors, who are 
in turn subordinate to the shareholders. The Cashier is subordinate to 
the President ; the under officers subordinate to the Cashier. Yet, in 
the highest sense, none of these are the servants of anybody. It is 
perfectly possible for each and all to render unto Caesar all that is due 
to Caesar without sacrificing one iota of self-respect or surrendering any 
single feature of true manliness of character. 

And so to live and move should be the determination — the resolution 
— of every bank subordinate. 

I may appropriately say here that it should be the constant endeavor 
of those officers of a bank who hold what are termed superior positions 
to cultivate and develop, as far as possible, the self-respect of their 
subordinates. A person may for a lifetime occupy a junior position 
upon the staff of a bank. Promotion does not come to all — under 
some circumstances cannot, however deserving of advancement the 
subordinate may be — yet, in the minor position, faithful service and 
manly character are entitled to just as much honor and to as full 
recognition as that rendered by those in more conspicuous places. I 
have had a long and broad experience in banking, and my observation 
has convinced me that there are instances almost without number 
where bank officers of merit and abilities fitting them for the highest 
positions in their profession have, through unpropitious circumstances, 
never gravitated out of very inconspicuous offices, while, on the other 
hand, many men scantily equipped for high place have been lifted, as 
it were, by unusually favorable circumstances into it. But the man 
makes the place, not the place the man. And among those who are so 
situated as to be able to take an inside view of these men and these 
places in banks of which I am writing, estimates of the real worth and 
standing of men are made up from what the men themselves really 
count for, not from the positions they happen to hold. 

There are few experienced bankers who cannot recall instances 
where they have observed men who have for generations faithfully 
served in such subordinate positions as junior clerks, bank messengers, 
etc. , who have really carried themselves better and showed more good 
judgment and ability than many others who have had, from high 
position, the nominal ordering of the goings and comings of these 
subordinates. 

It will thus be seen that I find no reasons for discouraging the right 
sort of young men from entering banks. And many a bank manager 
will be ready to confirm the opinion that I here express, that there 
does not seem to be in these days in either city or country, an over- 



4 PRACTICAL BANKING. 

supply of the right sort of young candidates for situations in banking 
institutions. 

And now let us see what general qualities the bank expects to find 
in those who desire to come into its employ and who look for advance- 
ment as their service continues. In selecting a young man for a vacant 
position the bank will certainly take the best one obtainable. The 
best will be none too good for the work. In the matter of integrity 
little need be said, for everything is understood. 

In buying a piece of paper or in selecting a bank clerk the bank 
Manager does not ask whether or not the parties are superintendents 
of Sunday schools, deacons of churches, or what may be their theo- 
logical views — whether they belong to the primitive Methodists or 
liberal Unitarians. He wishes to know whether the men are honest. 

Honesty is a mental trait. It runs in families. There are many 
young men who may do very well in life, if they are kept out of 
positions of trust, but who should never be given places in banks. 
Heredity is against them. 

The man who has once defaulted, in any shape or manner, should 
never again be placed in charge of other people's money — especially 
the money belonging to widows and orphans. Help him up in any 
way possible, but deem it impossible for him to serve in a bank. 

But in addition to integrity and general ability the bank will look 
also for a natural adaptiveness for this occupation. 

No young man ought to think of entering upon banking as a 
profession who has not a real taste for the business, and capacity 
adapted to the work upon which he is entering. He should have a 
good head for figures, a good hand for general clerical work, and a 
taste for financial matters. A person can somehow get along in the 
business of clerking in a bank — in some banks — without having many 
of the qualifications I have named ; but he cannot, under such circum- 
stances, be otherwise than a failure as a bank officer. He fails of 
promotion, is a burden to other and better clerks, and there is a 
constant feeling that he ought to have chosen some other trade. 

There is a practice, becoming more and more in vogue among our 
best banks, of taking in boys of from sixteen to eighteen or there- 
abouts, to learn the banking business — to become efficient and skilful 
aids in the profession by beginning on the lowest round of the ladder, 
at a boy's salary, and working along up by faithful and effective 
service. This method of supplying the staff of a bank with valuable 
officers is a good tiling for the boys and a good tiling for the banks. It 
is a practice which has for many years been followed in the English 
banks, particularly in the Bank of England, but one that has not long 
prevailed in this country. 

The general custom here in the past was to make up the corps of 
officers of matured material, selected from other branches of business, 
and youths who were entering all other branches of business as learners, 



THE BANK CLERK AND HIS PROFESSION. 5 

on small salaries, were seldom given an opportunity to obtain appren- 
tices' positions in banks. 

In the Bank of England, youths of from sixteen to eighteen years 
of age, many of whom are the sons of clergymen, officers in the army, 
and of what the Londoners term "tradesmen of the better class," are 
received into the institution as assistants in the various departments, 
and as out-Tellers br Messengers, at a salary of £80 and Christmas 
money — a salary certainly equal to the average paid to junior clerks 
here. In London private banks these juniors commonly start with £60 
a year. 

I found the Scotch banks had a custom of receiving young men into 
their service on a stated system of three years' apprenticeship, under 
regular indentures and on a very small salary. 

I have in my own practical banking done what I could by example 
and influence to promote this system of receiving boys just out of the 
higher schools into minor places in banks, and have never regretted my 
efforts in that direction. 

The best position for a youth in a bank is that of general assistant. 
In such a place he can, if alert and competent, quickly learn a deal 
about the methods and machinery of all the departments which are 
moving on about him; in these departments there will be constant 
chances for him to acquire practical knowledge of banking by practical 
work. As he works along, helping here and there, as exigencies demand, 
he is likely to develop an aptitude for some particular phase of the 
work, and in due time the bank gladly promotes him into the position 
or department for which he has shown himself best fitted. Every 
junior officer of a bank may, to some extent, have the advantage which 
we have mentioned as attaching to the position of general assistant if 
he keeps on the alert and endeavors to make himself acquainted with 
the general run of affairs in Ms institution, and in a proper manner and 
spirit learns, as soon as possible, the ways and methods of doing the 
work in each of the departments which are being carried along about 
him. There are many reasons why this course is to be recommended. 
It will, in the end, prove of great advantage to the officer himself; for, 
by acquiring this knowledge of duties which are outside of his own 
department, he will be fitting himself for fining other and more impor- 
tant positions in his own bank, and also be preparing himself for the 
work of running a bank where many departments are consolidated in 
one, if he should happen to be called into such a position. 

It has always been deemed, in some points, rather disadvantageous 
for a young man to enter upon banking life in a very large bank, since 
in such an institution, where many departments are run by many 
separate clerks, he is in danger of becoming but a spoke in a wheel, 
which is of little importance or value — unless surrounded and supported 
by others — which cannot go alone or stand alone. But well-informed 
and alert officers of the class I have named, who study into everything 



6 PRACTICAL BANKING. 

in the bank about them, are of great value to the bank which employs 
them. Customers — depositors — appreciate such officers. 

Bank dealers dislike very much to be sent wandering around from 
one department to another when they call to make an enquiry at their 
bank. If they happen, in their unacquaintance with details of banking 
business, to strike at first the wrong officer, it is often very agreeable 
to them to have their matters looked into and explained by this first 
man, instead of being told by him that the business does not belong to 
his department, and that they must go to some other desk. 

EDUCATION OP BANK OFFICERS. 

The action of the American Bankers' Association establishing an 
order of auxiliary membership of that Association, based upon terms 
of service and an acquirement of a thorough knowledge of practical 
banking, is deserving of the highest commendation, and it is to be 
earnestly hoped that the scheme may receive thorough support. There 
never was a time when a closer acquaintance with the practices and 
principles of banking upon the part of those engaged in it was more 
needed than at present, and to-day the opportunities are excellent for 
young mentin banks or on the way to positions in banks to acquire a 
full knowledge of the profession of their choice. The press is constantly 
supplying the financial and banking student with aids to study. Many 
of our banks have quite extensive collections of reference books and 
authorities and periodicals and miscellaneous literature bearing upon 
the subject of practical and theoretical banking and finance ; and banks 
which have not been in the habit of counting a bank library as a 
necessary part of the "furniture" of a banking institution are now 
beginning to buy, for the use of their employees, the best current works 
on banking, and to subscribe for reliable banking journals. 

It ought to be said here that the American Bankers' Association has 
simply taken the initiative step in the subject of practical education in 
banking of the young men in it, which, if carried forward earnestly, 
will surely produce sound results. By way of co-operation with the 
present move of the Association for the setting up of civil service 
examinations and certificates of progress made, local organizations of 
bankers' clerks for the study of banking should be organized in all our 
large towns and cities. And these local institutions should have regular 
meetings for discussion of bank practice, set up for themselves libraries 
of banking books, and subscribe for such banking periodicals as Avill 
aid them in their studies. 

AN UNWAVERING PROMPTNESS. 

An unwavering promptness in the discharge of all his bank duties 
is what every competent bank Manager demands, and has a right to 
expect, of every man on his staff of officers. Time is, in banking, of 
pre-eminent value. It is more than money. Anything in the methods 
and machinery of banking — whether it is in the officers themselves or 



THE BAJK CLERK AND HIS PROFESSION. 7 

in their modes of doing work — that tends to a waste of time is a steady- 
cause of annoyance, worry and disarrangement. And a chronic tendency 
in an officer towards dilatoriness and slackness, no matter what may be 
the natural abilities of such an officer, is one of the most exasperating 
of things to an able and prompt Manager. I know of no single feature 
in the character of an honest bank officer which is likely in the end to 
be more fatal to his prospects of advancement, and more sure to 
undermine his good standing with both customers and Directors, than 
this tendency I have named. 

The bank officer, whether he is Cashier or Messenger, or on any of 
the rungs between these two positions, should systematically cultivate 
a habit of unswerving promptness in the discharge of every class of 
work that stands before him in his daily routine at the bank. If there 
is work to be done, let the work be done first, and the newspapers read 
afterwards. The usual hours of bank work in this country are not 
burdensomely long. And these hours should be strictly given to the 
work of the bank. Private errands, private business of all sorts, should 
never be allowed to interfere in the smallest way with these morning 
bank hours and their special duties. 

I have never believed in the setting up in banks of too* many iron 
rules regarding the regulation of the matters to which I am here 
referring. Bank officers of intelligence, strong common sense, and of 
a conscientious type of character, will make these rules for themselves, 
and live up to them. Bank officers of different make-up are out of 
place in a bank ; and, in well-managed banks, are apt to make an early 
discovery of that fact. 

Bank hours, in this country, are generally frOm 9 to 2 or 3 o'clock. 
Nine is not a severely early hour. The clerks should be on hand at 
that time. And they should leave the bank as soon after the regular 
closing hours as they can without leaving any work behind them that 
demands immediate attention. 

The after-work hours, if properly used, may be of great value in 
many points, as I have elsewhere shown, and the more of them they 
can consistently get the better. 

I was struck by the sagacity of a remark made not long since by a 
distinguished banker, who was a great worker, that nothing gave him. 
more satisfaction than to see his officers put their work through promptly 
and get away early. 

Here are some of the ways in which, in a most significant manner, 
bank officers show a remissness, where those officers are of the type 
which, to use seamens' language, may be termed the slow-going-about 
class : 

They are apt to fail in coming home promptly after the time allotted 
to them for vacations has elapsed, allowing the most trifling causes to 
interfere with their return at maturity. Little illnesses, and sometimes 
what are really only imaginary indispositions, are apt to dispose them 



8 PRACTICAL BANKING. 

to remain away from the bank. And, for trifling reasons, they are apt 
to ask for occasional absences for a day or so — absences for the purpose 
of attending to matters which the alert and prompt bank clerk would 
not deem important enough to call him away. 

And, as I have before said, the bank officer who is chronically 
deficient in general promptness may be depended upon to disappoint 
the Manager by not being regularly on hand at the right hour in the 
morning. To remedy this trouble, the Bank of England has an arrange- 
ment which might perhaps be introduced with good results in some 
banking quarters this side of the water. It has what is termed "The 
Attendance Book." This book lies open, every morning, upon a desk 
-which every officer of the old bank must pass as he comes each day to 
bis work ; and, as he marches past it, he writes his name in it. At 9 
o'clock a black line is drawn across the page below the signatures of 
the prompt men, who have already passed in, and all who come along 
late must put their slow signatures under this black mark of reproof. 

If an officer is three times late in the Bank of England, he is 
summoned before its Directors and reprimanded. If again, after this 
iormal reprimand, he fails in promptness, and can furnish no reasonable 
excuses, he is invited to resign. 

Such rules as this are, of course, more likely to be needed in an 
institution having a vast number of employees, like the Bank of England, 
than they are in banks of more moderate size. And they are also more 
in harmony with the general style of administering affairs on the other 
side of the water than they would be with ways here. 

I found the head clerks and accountants of the old Bank of England, 
in a late visit made there, very courteous and prompt, and they 
impressed me as being able and skillful men ; but the general rank and 
file there have the reputation of being machine-like men, who are 
behind the times in their ways and methods. 

In the matter of promptness, as in many other matters, the force of 
example is a great power in a bank. If the higher officers of a bank 
are slow, dilatory, and generally slack in their administration, the lower 
down men on the staff are, of course, quite liable to be somewhat 
demoralized. 

The bank which is so unfortunate as not to have, as its chief 
executive — as its Cashier — an alert and prompt man, is, in time, quite 
liable to find its entire staff falling into habits of remissness and 
sluggishness. 

The setting up of the Clearing-House system in our cities has had, 
I think, the effect to make the bank officers of those places perhaps a 
little more systematic in the matter of morning promptness of attend- 
ance than they might otherwise have been. Many of our city banks 
nominally open at 10 o'clock in winter and 9 o'clock in summer; but, 
in cities where the morning clearing is 10 o'clock sharp, there is a pretty 
complete abrogation of the 10 o'clock opening. Winter and summer, 



THE BANK CLERK AND HIS PROFESSION. 9 

where clearing is 10 o'clock, officers of active banks — head officers not 
excepted — are generally found on hand at 9. 

An illustration of individual influence in the matter of promptness 
is shown in the following little incident : 

The minister said he had become tired of starting his Sunday- 
services at a quarter of eleven o'clock, when they were announced to 
begin at half-past ten o'clock — tired of seeing his congregation come 
late. He therefore announced that he was determined on a reform in 
this matter, and would, on the next Sabbath, and on all coming 
Sabbaths, commence services at half -past ten o'clock if there was not 
a person in the house. I liked his idea, and so presented myself at his 
meeting the next Sunday at half-past ten o'clock. Two or three of us 
were there ; but the minister was five minutes behind time then, and 
the same on the succeeding Sunday. Promptness at once died out 
there, for it was not practised by the head man. 

When bank officers are unexpectedly detained at home for sufficient 
reasons, they should always send prompt word of the detention to the 
bank, so that their work may be at once taken in hand, and there be 
no waiting and enquiry for them. If on the home-stretch from a 
vacation they meet with blocks in their way, and are detained over 
time, they should use special pains to get word of their lock-out to the 
bank. Proper care about these little points, which one would think 
there was little need of urging upon intelligent bank officers, is really 
sometimes neglected by them ; and neglect in these matters is often a 
cause of no little inconvenience to the bank. 

FAITHFULNESS IN WORK. 

There are bank officers who would never dream of directly defrauding 
the bank for which they labor and who are scrupulously honest in all 
their monetary connections with their institutions, but who are never- 
theless wanting in the spirit of integrity in the discharge of the routine 
duties of their positions. They go through their duties in a somewhat 
mechanical manner, taking little real interest in the welfare of their 
bank, and slighting and shirking their work whenever opportunity 
offers. Such are simple eye servants, whose only object seems to be to 
do as little as possible, and to manage to get through the labors of their 
department in such a manner as to enable them to keep their position 
and a respectable reputation and draw their salary. There is a word 
in very common use among English mechanics applied to work that 
has been shabbily done. It is said in such cases that the job has been 
"scamped." There is "scamping" in bank work. The workers of the 
scamping class are sure to be careless in the use of the property of the 
bank. They waste the stationery and other properties of the institution 
that are used in their departments. They waste time, which is the 
property of the bank, by insufficient attention to the duties of their 
position, and are apt to be out of the bank and on private errands 
during its regular business hours. The worst and most unmanly 



10 PRACTICAL BANTLING. 

feature of all this misdoing is that it is done in a hidden manner. As 
we have said, the class of which we write make a study to be proiicient 
in the art of eye service. 

GOOD NATURE. 

The bank officer while at his post of duty is, of course, expected to 
maintain the most imperturbable good nature. The dealing public, 
which is brought in contact with him, whatever may be its own 
shortcomings in the matter of grace and temper, does not expect to 
tolerate the slightest departure from perfect equanimity on the part of 
their servants the bank officials. The first lessons to be learned by 
the bank officers are to bear and forbear, to be very patient, and to be 
perfectly unresenting. 

I have been speaking of the temper and carriage of the banker at 
his business. But he has another life that should be brought into 
view, and over which the requirements we have just described might 
also extend. The mind-wearing and nerve-wearying routine of labor 
through which he daily passes is apt to leave him in an irritable and 
nervous condition — a condition tending to disqualify him for the proper 
discharge of his social and domestic duties. But he makes a great 
mistake in self-management if he gives way to these dangerous 
influences of his harrassing occupation and allows himself to sink into 
a condition of chronic irritability, or that of morbid aversion to social 
pleasures or the natural stirs and excitements of domestic life. 

It is well for the bank officer to have a family about him. The 
cares of providing for and generally looking after all the material, 
social and educational wants of a household should be viewed by him 
as a blessing in disguise. The presence of the head of the family 
should be like sunshine in the house, and he should there voluntarily 
school himself to the exercise of that patience, good nature and 
forbearance which is, as one might say, forced upon him when in the 
outside world and at his place in the bank. The children who cluster 
about him should be looked upon as customers, who deserve the most 
tender and persistent attention. They are hostages which he has 
given to fortune, and their presence may be made to serve as a guard 
and inspiration to his whole course of business life. 

The man who can look upon the innocent faces of his little ones, 
who are clinging about him and believe in him, and Avho are proud of 
him, and then go out into the world and deliberately violate a trust, 
and thus bring lasting disgrace upon those whom it was his duty to 
honor and protect, must be lost to all true sense of manhood. 

FINALLY. 

I think it follows that a person can be a bank officer and be a good 
deal of a man ; a person can also be a bank officer and amount to very 
little — either in the bank or out of it. 

I doubt not that it will be urged that I have, to use an agreeable 
piece of slang, drawn a very large order in this discussion of the quali- 



THE BANK CLERK AND HIS PROFESSION. 11 

flcations of a bank officer. But it is better to do thus, and then try the 
best we can to fill it — to raise the standard high, and try to reach it. 

And I must add that the majority of the bank officers I have known 
come well up to the standard I have presented. Of many a President, 
Cashier, etc. , whom I have observed and known might well be said, in 
the quaint, but expressive words which I have seen quoted as used by 
a Continental man trying to speak English : "Never was better man in 
the right place as this man was. " 



12 PRACTICAL BANKING. 



CHAPTER II. 

THE PAYING-TELLER AND HIS CASH. 

One of the most important offices in a bank is that of Paying- 
Teller. The Paying-Teller's duties are clearly indicated by his title. 
He is the disbursing officer of his institution — he pays out all its moneys. 
He keeps in hand the cash of the bank and meets all cash demands 
upon it. In a proper sense, he is the Cashier of the bank. Many 
outsiders so term him ; and, though entitled Teller in this country, he 
is in London termed the Paying-Cashier, while the Receiving-Teller is 
there denominated the Receiving-Cashier. 

The position of Paying-Teller requires a man of good abilities ; and 
the men who are to-day holding that position, particularly in our large 
banks in our Clearing-House cities, are, as a class, strong, skillful and 
irreproachable men. 

I can see how some positions in a bank can be "filled" by men of.;, 
only moderate skill in ciphering, counting and writing ; I cannot 
imagine how any man who is not well-nigh an expert in all these 
things, and also of excellent judgment, and good address, patience and 
unwavering good nature, can make a successful Paying-Teller in a 
great city bank. 

This official generally climbs into his honorable position up the 
ladder of civil service, and there is no other path to the place, as to do 
the work of a Paying-Teller requires long apprenticeship in banking. 

In the cities these officials are generally paid salaries next highest 
to that of Cashier ; and the salary in this instance is a correct indication 
of the rank in the promotion line. 

His bonds are in amount only second to those of the Cashier ; and 
in the handling of the cash of his bank he is held responsible for its 
correctness. But, though nominally held responsible for every dollar, 
and for every error he may make, this full responsibility is not in all 
cases and under all circumstances fully enforced. 

This point of bank officers' responsibilities, and also the general 
subject of bond giving and bond enforcing, I fully discuss elsewhere. 

Here I give the form of the Paying-Teller's only book — a form which 
is an excellent specimen, with the breath of life in it, for it is an actual 
exhibit of an actual day's work of a good-sized and well-managed bank. 
See Fonn 1 on opposite page. 

Every Paying-Teller is continually having brought before him from 
the nature of his work questions which require for their right decision 



THE PAYING - TELLER AND HIS CASH. 



13 




/fetA^y 



tf, JfSO 



Dr> 



SECO/VD TELL 



(/ Cr. Dr. 



CASHIER 



Cr. 



Balance, 
Chuck., 



. *} 



Deposits,, 



W7 

^■0.000 

/<J~£oo 
/0. 000 



*ZQO.&d-l 



Jt 



DeJjosifors'Cks 
3a.nkCha.rges, 

NY.Banlts, 

Discounts, 

Balance , 



+*■& O .<J <?3 70 



ClHo Checks, 
Bills. 



Gold, 



Si'lyei 



&.700 



<J.7-*& 



<J 2f 



*<*/. 72. 



1J0 

/<Ji2. AVJ 



77*9 



■#-6a.j<r<) 



*Z 






zd. 






700. 



JfO\f<?J 
eJ\a £>C 



Gfyu+tJ 



Discounts, 
Checks, 
Deposits, 
Balance, 



^ft 



7/Q 



<otT& 



■*/£,<¥ Jx 



DEPOSITORS' CHECKS 



DI6COUNTS 



U9 or CAS 



CI 631*111 gEo.Cb 



Sf 



Guese^iA 



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/'O 

-*M 
/ & o 

or oco 
/ 



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ZcKcoO 



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Gold.. 
Cerkifi 



7+ 



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/*y' 

/a o 

//.tT~O0 






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BANK CHE 






/-z. ore 






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//6. tpfjtyj 



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^iryZifo^ 



/ 



704 



*7 



DR. CLEARlfclG; HOUSE 






/3 



/y/sjHfiyf 



Certificates, 

Coin,, 

He eg Teller, 



FracCy-'fc 

minor coins 
fte'c'g Teller, 

LegalTenderj 

TT&Certs., 

Sills, 



00 



Bills, 



flanhChe :ks, 



DeJboars'Cf 'ks, 






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t>2. 



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o o 



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IstJJalBkJill} 
OtfcerlOilU, 

Bficg Teller, 

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Clearg'HoiMe 
Jlecg Teller, 



,6 



fo 



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/**f 



(s>0 



j'tytr&fte 



Form 1. 



14 PRACTICAL BANKING. 

good judgment, backed by experience. Let us look at some of the 
problems likely to come before a Paying-Teller at any moment. 
RECEIPTING FOR THE PAYMENT OP CHECKS. 

The gentleman presented to the bank for payment a good check 
upon it for $1,050. The check had been drawn payable to the order of 
a party who had duly indorsed it in blank and passed it over to the 
present identified holder who was endeavoring to collect it. The 
Paying-Teller asked this holder to put his name upon the back of the 
check. This he refused to do, saying it was not payable to his order, 
that he had no interest in it except to collect it, and that the paying 
bank had no right to demand from him a receipt for the money since it 
Avould have a full and complete voucher in its hands when it took up 
the check. The point here raised is of long standing and one that has 
always been difficult to settle. Unquestionably the bank had no legal 
right to compel the collector of the check to give an acquittance since 
his surrender to it of the perfect voucher was enough. 

But the signature of a so-placed check collector is a very desirable 
tiling for a bank to have for corroboration and reference should 
anything wrong about a paid check afterwards turn up, and it is 
desirable for all Paying-Tellers to procure this collecting name when- 
ever possible. Few reasonable check collectors will, under the circum- 
stances described, be found disposed to refuse to furnish it. And 
where checks are drawn payable, for instance, to "J. Smith, or 
order," to "order of J. Smith," and are presented by J. Smith, the 
bank would also do well to secure J. Smith's indorsement. 

Even when checks are drawn payable "to bearer" many banks 
make a practice of requiring the indorsement of the collector if 
presented at the counter by a party not the signer. This is a good 
method, because it gives the bank a name for reference in case there 
should be trouble about the check in the future. 

PAYING PART OF A CHECK. 

A man came to the bank with a check upon it for $900, drawn by a 
depositor in his favor in payment of a bill. The Paying-Teller declined 
to pay it, finding only $700 to the credit of the drawer. The holder, 
who had good reasons for being anxious about his claim upon the 
drawer of the check, having heard that he was in a failing condition, 
resorted to an ingenious method. He deposited $200 with the Receiving- 
Teller to the credit of the drawer of the check, and then, returning to 
the Paying-Teller, presented again his $900 check, and was paid its full 
amount. He had by this shrewd move received only $700 for a demand 
of $900, but this in the end proved a very heavy dividend compared 
with what other creditors received from the suspending debtor. 

There are interesting questions naturally raised in recalling a case of 
this description. Can a bank be forced to pay part of a check ? In 
the instance given could the holder of the $900 check compel the bank 



THE PAYING - TELLER AND HIS CASH. 15 

to pass over the $700 standing to the credit of the check drawer upon 
giving the bank the $900 check ? It is a curious fact that there are 
upon record no legal decisions covering this point. Without doubt any 
bank paying a part as described and receiving the voucher for the 
whole check would be doing a safe and justifiable thing. It is a 
perfectly regular and legitimate method for a bank to accept a deposit 
and pay a short check. There is nothing out of the way either in the 
movement of the check-holder or the bank. The one had a perfect 
right to give away his $200 and the other to receive the deposit of the 
$200 and pay the $900 check when it was made good. 

A SMALL CERTIFICATION. 
The man kept a rather small account with the bank. He asked the 
Paying-Teller to certify the check he was presenting, which check was 
for only fifteen dollars. The Teller hesitated about certifying a check 
for so small an amount, and told the holder of it that he would prefer 
to cash it upon the spot. The depositor objected most decidedly to 
this latter method of settlement, peremptorily demanded a certification 
of it, and made an appeal to the Cashier about the matter. This 
dispute and its settlement involved one or two interesting points which 
were correctly laid down and settled by the Cashier in his management 
of the demand of this pressing depositor. There is no question but 
that a power to certify checks drawn upon a National bank does, by 
the provisions of the bank Act, inhere in the office of a Cashier. But 
the Supreme Court of the United States has ruled that the Directors of 
a National bank can, by formal vote and general notice thereof, 
prohibit a Cashier from exercising the power of certification. This 
very many of the National banks, particularly in Boston, have done, 
being led to do so by the fact that very disagreeable complications 
have arisen out of the exercise of such Cashier-power in some notable 
cases — the Boston Mellen-Ward State Bank fraud being one of the most 
famous. But, as we have said, in the absence of prohibition and due 
notice, the Cashier of a National bank can certify upon actual deposits, 
but not in excess of them. At the same time it must be borne in mind 
that no check presentor can compel a certifying bank to certify. The 
bank can elect to pay, in lawful money only, if the depositor refuses 
any other, and, in case of the presentation of little checks, as in the 
instance we are quoting, it is certainly wise banking to cash the checks 
rather than to set them afloat in a certified shape. 

"GOOD, WHEN PROPERLY INDORSED." 
Checks upon banks are often presented to them for payment when 
in want of some indorsement, or bearing upon their backs some fatal 
irregularity of indorsement which precludes the bank from making 
payment. We have now in mind such cases as can not be helped along 
to a settlement by any sort of a guarantee of indorsements, or want of 
indorsements, which can be tendered by the collector— the presentor — of 



16 



PRACTICAL BANKING. 



the lame check. In such instances there is nothing for the presenting 
bank to do — supposing, for illustration, that the check is in the hands 
of some collecting bank — but to return the unpaid check to the corres- 
pondent from whom it has been sent, with a request that the missing 
indorsement be supplied or the faulty one strongly guaranteed, just as 
the case may happen to demand. But the check, which is to take a 
journey back to its senders, may have to travel far. It is a perfectly 
good check now ; but when it returns for a re-presentation it may 
be the check of an insolvent. Here the banker sees a risk — a responsi- 
bility — cropping out. How shall he avoid it ? Simply by asking the 
bank upon which the check is drawn, and which concedes that it is a 
good check now, to set aside the funds for which it calls, till it comes 
around again in shapely form. And this setting aside of the money 
should be done in the regular way by certification of the check. When 
a check is certified it is, of course, charged to its drawer, and no other 
wandering check can step in between this one which has been presented 
and certified and returned on account of informalities on its back. A 
form of certification specially fitted to the circumstances should be 
used, and no bank has a right to refuse to certify checks in this way 
under the circumstances we have described. Here is a good form for a 
certification of the class we have suggested : 



%^3oa 



Natio 



Pay to the orde 
No. 59Z 




..Bank, 



Dollars. 



t-je^CS '-. 




Form 2. 
COUNT YOUR MONEY. 

Whenever Receiving or Paying-Tellers take in money on deposit, 
or in payment of paper held for collection by the bank, they intend to 
count the same at once — count it before the parties with whom they 
are dealing have left their presence. And when dealers with a bank 
receive from its Tellers, in the way of check payments or returns of 
change, cash of any sort, they are also expected to count their money 
before they carry it away. 

But these very good rules have their enforced exceptions. A note- 
payer may bring to the counter of a bank a stack of small bills, 
amounting to $50,000, when small bills are heavy in the market, and 
tender the same in payment of his matured note which the bank has 
asked him to call and pay. The National Bank Act says that "every 



THE P A YETO - TELLER AND HIS CASH. 17 

National bank shall take and receive at par for any debt or liability to 
it any and all notes or bills issued by any lawfully organized National 
banking association." 

The point has sometimes been made that the payment of a note 
simply held for collection by a National bank is not a payment of a 
debt to it, but, without doubt, this is a strained point. 

Be that as it may, National banks are often tendered huge piles of 
small bills for debts, like notes discounted, which no one can term other 
than debts due to them. How shall they manage such cases as these 
in the matter of counting ? There seems to be no other course than 
this. Endeavor to get the payer to leave his money and the note he 
has called to pay till the bank has had time to count his bulky bills. 
When the bills have been counted, and found correct, send the payer 
his cancelled note. Or, if the payer is a reasonable and perfectly 
responsible party, secure from him his guarantee that the bills are all 
right, and his consent that the bank shall take its time to count them,, 
and then give him his note on the spot. 

There is another point in connection with this matter of handling 
large amounts of small bills which is interesting and important — a point 
similar to the one just discussed, though it covers transactions the 
reverse of those named. Banks are often called on to provide heavy 
pay-roll supplies of small bills — supplies which are sometimes suddenly 
called for and which must be filled at all hazards. 

Mill labor is a most sensitive article. It has to be handled with a 
deal of care and the best of judgment. A manufacturing company 
may have credit hardly second to the Bank of England, yet all this 
might go for nothing in the eyes of a crowd of operatives who, through 
the failure of the company's bank to send to the mill a supply of 
currency, were not promptly paid oil at the due time. The imperative- 
ness of these mill-calls for small bills, taken in connection with the fact 
that, at some periods, they are so difficult to be got at, and that a long 
notice ahead will barely get them in at the last moment, leads banks to 
take them on from other sources — particularly from other banks — when 
there is no time to count them before paying them out to the mill 
paymasters. This method of procedure may not be called good banking, 
yet it sometimes appears to be a necessity, and banks which are thus 
driven into a corner in the matter accept the risk as a legitimate one. 

It is, of course, decidedly better that a bank should never receive 
and pay to the third party bills which it has not counted, but as we 
have explained, such action may sometimes be defensible. 

The mill paymasters are expected to count bills so received at once 
and to return straps where variations are discovered — straps which may 
enable the bank to trace the errors back to the right sources. 

IDENTIFICATION AND IDENTIFIERS. 

Our banks make it a rule not to cash checks that are drawn payable 
to order, unless the party presenting them is known at the bank — ifi 



18 PRACTICAL BANKING. 

squarely identified as being the right person. Many of our banks even 
go further than this in this matter of identification, and take the pos- 
ition that they will require identification where the checks presented 
are drawn payable to bearer. If the first-named practice is one resting 
on justifiable caution, the second rule must be described as caution 
without justice ; for a bank cannot rightfully ask for the identification 
of the holders of these bearer checks, since their drawers waived that 
demand when they filled them up in this way. But, be this as it may, 
banks certainly should be reasonable in this matter of requiring iden- 
tifications — be ready and willing to waive the rules under certain 
circumstances, and assume, as a part of the legitimate risks of their 
business, the very slight risks which good judgment will incur, in now 
and then paying a check for $25 or so to some well-appearing man or 
woman who is so unfortunate as not to be able to respond promptly in 
the affirmative when the Tellers fire off the stereotyped salute of "Do 
you know anybody in this bank, or do you know anybody outside of 
this bank who is known in this bank ?" 

If banks are not employing Tellers who have sufficient judgment — 
.gumption — to be intrusted with a little latitude and discretion in this 
identification rule, they should always have some President or Cashier 
within prompt and easy reach who has the courage and judgment to 
cut the red tape at the proper time. 

Every one knows that it is sometimes just impossible for some 
check-holders — strangers in strange cities, for instance — to procure 
identifications ; and every one has heard of the amusing, as well as 
aggravating, incidents that have happened in banks in connection with 
this identification controversy with honest check-holders. 

In visits to, and talks with, London bankers on this point, they have 
expressed to me great surprise that banks in the States kept up this 
identification practice, and said they did not see how our banks in New 
York, Boston, etc., could ever get through a day's business under such 
a rule. 

Long ago the business men and bankers of England became con- 
vinced that certainly London's banks could never get through days' 
works unless identification was abolished ; and Parliament was besieged, 
and besieged successfully, for a law authorizing English banks to pay 
;all checks apparently properly indorsed to parties presenting them 
without identification. I have stood by the side of the paying Cashier 
of the Bank of .England and seen him steadily rattle out his money 
under this law to all who came with checks. 

Even when the bank is following good methods in this matter it may 
find its care unavailing, for banks have been defrauded by swindlers 
who have ingeniously and deliberately worked themselves into an 
acquaintance with them in something after this style: 

He was a notorious scoundrel. He came to the city as a stranger 
and introduced himself to a large dealer in shares and bonds as, say, 



THE PAYING - TELLER AND HIS CASH. 19 

Mr. Robert Jones, from the interior, who wished to make some invest- 
ments in bonds, etc. After some little talk, he bought a few hundred 
dollars' worth of securities, and paid the cash for them. A day or two 
after he made another small purchase of the same house, again paying 
cash. Subsequently he called and said to the dealer he had concluded 
to sell a part of the securities he had first bought of him. The dealer 
bought them of him, giving him his check upon his bank. " Investor " 
Jones presented the check at the bank. Was told he would have to 
procure an identification. He said he should be happy to do so, and, 
going out, he soon returned with the dealer we have alluded to, who 
said: "All right; this is Mr. Robert Jones, a customer of ours." 
Having, in this quiet way, established an acquaintance with the bank 
— been fully identified and introduced there, by a highly respected 
dealer — he had little difficulty in collecting there a few days after a 
genuine check which he had carefully raised to ten times its original 
amount — after which Mr. Jones left the city and was seen there no 
more. 

In view of the carelessness with which some business men will act 
in this matter of furnishing identifications, and of the losses which 
have come upon many banks, under my personal observation, from 
action under those "cooked up" identifications, etc., such as I have 
described, I now fully sympathize with the sentiments expresssed by 
the bothered Paying-Tellers relative to this matter. "When a man 
comes to my desk now, " says the Paying-Teller of the period, ' ' saying 
he knows the stranger who is standing without, waiting for his money 
on a check, I feel like asking him, ' How much do you know him ? ' " 

There is a somewhat novel view of the identification question that 
has sometimes been taken by rather pugnacious, but honest, check 
collectors, which is of this sort: 

They say that when they present a check to a bank, which is 
payable to their order, and which they order the Paying-Teller to pay, 
the Teller has no legal right to assume that the presenter is not the right 
man — not the man he represents himself to be — and that the Paying- 
Teller ought at once to pay him the money, or prove he is not the man 
he pretends to be. 

I have many times heard check presenters say to the Teller, "If 
you want any identification, go and hunt it up ; I am not going to do 
so ; but I want my money. " The great drawback to the force of this 
logic is found in the fact that the bank has possession — and possession 
is equal to much law. 

It is an excellent idea for Paying-Tellers to require identified 
collectors of indorsed checks, which are not payable to their order, 
to put their names upon the backs — in effect to receipt for the cash. 
This recommendation will also apply to holders of "bearer" checks 
in cases where it has been thought wise to demand identification of 
such a holder. Another record that is not only proper but important 



20 PRACTICAL BAXKIXG. 

is a careful memorandum upon the paid check of the name and address 
of the person who in that particular case identified the payee. 

This brings up naturally the questions of how much responsibility 
an identifier takes upon himself in this volunteer service, and to what 
extent the bank can have recourse to him in case any trouble results 
from the payment which he helped along. 

These are questions of curious interest. They come up often in 
business and banking circles, and are easier raised than answered. 

As an illustration, I will mention a case of payment to a stranger 
who presented a check upon the Blank National Bank, purporting to 
be payable to Ins own order. The stranger payee was asked to procure 
an identification. The check was for a thousand doUars, and was made 
payable to the order of, say, John Smith. Some one known to the 
bank was brought forward, who said he knew the person presenting 
the check to be of the name to which it was made payable. The check 
was cashed. No record of the identification of the character which I 
have suggested was made. The check turned out to have been paid 
to the wrong man — to a forger — who had stolen it. The Teller knew 
he had in this case followed his invariable rule, and been furnished at 
the time of the transaction with a satisfactory identification ; but he 
could not, for the lif e of him, ever recall the name of the identifier. 
The matter ended in mystery. The bank lost the money. Whatever 
responsibility attached to that lost identifier never overtook him. 

But I ought to add, that making the recommended record of the 
testimony of an identifier is not always sure to be of any material 
assistance in cases of fraud and loss. The Paying-Teller of the First 

National Bank of cashed for an identified stranger a check, 

purporting to be payable to his order. At the end of the month, when 
accounts were compared, it was revealed that the stranger was a 
swindler, who had stolen the check and forged an indorsement. When 
the Paying-Teller came to re-examine the check, he found that he had 
marked on it, at the time he paid it, the name of his Receiving-Teller 
as the identifier. This Receiving-Teller could not recall any of the 
facts connected with this identification. He said he supposed he iden- 
tified the man, but could not remember anything about it. Nothing 
more could be said or done ; the bank pocketed the loss. 

But tins identifying responsibility is, after all, a very slight — a very 
intangible thing; and, for that very reason, identifiers should, out of 
regard for the banks, honest dealing, etc., be exceedingly careful in 
their movements in this identification business. 

If I identify a check-collecting man at a bank, I simply testify that 
he bears the name — that I know he bears the name, which is the name 
to which the check is made payable. I don't even assert that he is the 
right man; for there may be, somewhere, another man of the same 
name, who is the right payee, and this man, whom I am identifying, 
may, by error or fraud, have obtained possession of the paper. I do 



THE P A YIIS'G - TELLER AST) HIS CASH. 21 

not vouch for his honesty, for his financial responsibility, or for any- 
thing, except that I well know his name to be so and so. Of course, I 
should never intend to identify him at my bank, unless I supposed he 
was all right in all respects. But I am discussing the purely legal 
aspects of this identification business ; and the conclusions which I 
reach are in accordance with decisions which have been made time and 
time again, and in accordance with common law and common sense. 

And unless it can be shown that I have been in collusion with a 
fraud, aided by my identification — that I have not been entirely honest 
and innocent in my part of the business — I can not be held at all 
responsible in the premises. 

I have been kindly furnished, by a Massachusetts bank Cashier, 
with the story of this interesting case — a case where a bank, through 
no fault of its own, lost $250, by cashing a check for the wrong man 
who happened to bear the right name. 

His name was Nolan — John Nolan. In the directory of the city of 
this incident there were many John Nolans — twenty or so. The letter 
carrier delivered to this bad John Nolan a letter addressed John 
Nolan, containing a check for $250, payable to order of John Nolan. 
This John Nolan, the fraud, took the check to a bank where he was 
known as John Nolan, indorsed it, and raised the money on it. In 
time the right John Nolan turned up, proved that the other John 
Nolan had stolen his check, and forged his indorsement, and demanded 
and obtained the $250 from the victimized bank. The Cashier of this 
bank, who is a very careful man, had exercised extreme care in this 
check-cashing transaction. He had reason to believe that the thieving 
John Nolan was likely to receive a $250 check, knew his name and 
person well, and, when he cashed the check, asked him particularly if 
he was the right John — the John named in face of the check — 
carefully cross-examined him on this point. So, as in duty and 
conscience bound, the bank assumed the loss, and attached no blame 
to then* Cashier — assumed the loss as the result of one of the inevitable 
risks of doing a bank business. The forger had, of course, taken 
himself off into some non-extraditing country. 

There is a simple point of importance and interest that must here 
come to the mind of any experienced banker. It is this : Ought not 
the drawer of a check to the order of, say John Smith, of New York, 
or Boston, to define in his order which John Smith is the John Smith 
to whom he is ordering a payment ? And, may not the omission so to 
do, under some circumstances, throw upon a drawer some responsibility 
in case such a check is mailed into the hands of a real, but dishonest, 
John Smith, who steals it and forges on it ? 
PAYING UNINDORSED CHECKS WITH CERTIFICATES OF DEPOSIT. 

A very heavy customer of the bank, whose current daily balance 
was large and who seldom asked for accommodation of any kind, 
presented in person his perfectly good check upon the bank for one 



22 PRACTICAL BANKING. 

hundred thousand dollars. The check was drawn to the order of an 
individual who had not indorsed it. The drawer asked that the check 
be certified, without qualification, in its then unindorsed condition. 
The bank would have been perfectly willing to do this if it had not 
been for the fact that its Directors had voted to prohibit the Cashier 
from ever certifying checks. If it had certified this unindorsed check 
it would have used the certification form of ' ' Grood when properly 
indorsed." The customer was annoyed on account of the Cashier's 
enforced refusal to certify, because he wished, in paying the check to 
its payee, to secure upon it his indorsement as a receipt, a voucher, in 
a transaction he was making, and this payee had refused to take the 
check in settlement without a certification of it by the bank upon 
which it was drawn. The signer of the check now asked that a 
certificate of deposit, drawn in favor of the payee of the check, be 
issued upon the check in its still unindorsed condition, since the signer 
of the check could not, under the circumstances, secure the payee's 
indorsement. This request the bank very correctly declined to grant. 

This little banking incident brings up two important details, whether 
a bank should give an unqualified certification of an unindorsed check 
and the question of the propriety and safety of the practice of paying 
an unindorsed check by issuing therefor a certificate of deposit drawn 
in favor of the payee. Without doubt the experienced banker who 
gives careful thought to these points will agree in the opinion that it 
would not have been good banking to accede to either of the requests 
made by the depositor in the case above described. 

CHECKS PRESENTED AFTER DEATH OF THE DRAWER. 

There are many questions raised in practical banking relative to 
the rights and duties, both of banks and their dealers, under certain 
circumstances and situations which have to be settled on their 
individual bearings, as they from time to time come up and, in some 
cases we have in mind, bankers and business men appear forced to 
move without the aid of legal decisions, customs or statutes. 

For illustration, the law declares in most States that a bank shall 
stop the payment of a check whose signer has died before its presenta- 
tion. In the busy whirl of every-day banking, in large places, our 
Tellers, who have about as much as they can do to attend to the 
pressing demands of the living, as they swarm in upon them with their 
demands and their deposits, cannot possibly keep the run of all the 
deaths that are currently taking place among their check drawers. 
They incidentally hear promptly of some of them ; others may not come 
to their ears for a long time. So it happens that banks are every day 
paying checks of men who are dead. It seems impossible for them to 
establish any system by which this sort of payments shall be avoided. 
Whatever may be the law, equity will, without doubt, save them from 
any damages in cases of this description, should such seem to threaten. 

Since the customs relative to the treatment of checks vary so 



THE PAYING - TELLER AjSD HIS CASH. 23 

widely, and in view of the fact that the law gives out an uncertain 
sound, we are glad to find that the Massachusetts Legislature has taken 
the subject in hand and given us firm ground in that State upon which 
to stand. 

The following bill passed the Massachusetts Legislature by a unani- 
mous vote in 1885, and it is to be hoped that the Legislatures of other 
States will take similar action. 
AN ACT to Authorize the Payment of Checks, Demand Drafts and Savings 

Bank Orders, in Case of the Death of the Drawer before Payment. 
Be it enacted, etc. : 

Section 1 . Any depositary, subject to withdrawal by check or demand draft, may 
pay any check or demand draft drawn by any person who has funds on deposit to 
meet the same, notwithstanding the death of such drawer in the interval of time 
between drawing such check or demand draft and its presentation for payment* 
when such presentation shall be made within ten days after the date of such check 
or demand draft. 

Section 2. Savings banks and institutions for savings are hereby authorized and 
empowered to pay any savings bank order, drawn by any person who has funds on 
deposit to meet the same, notwithstanding the death of such drawer in the interval 
of time between signing such savings bank order and its presentation for payment, 
when said presentation shall be made within thirty days after the date of such savings 
bank order, and at any subsequent period, provided the depositary has not received 
actual notice of the death of the drawer. 

When the steamer City of Columbus went down on the Massachusetts 
coast many very prominent Boston business men lost their fives. Among 
them was the Hon. E. S. Rand, of Boston, who was a conveyancer of 
extensive practice and a manager of many trust estates. 

The embarassments that were entailed upon the holders of his out- 
standing checks were the proximate cause of this legislative action 
which I have described. 

HE FOUND IT OUTSIDE THE COUNTER. 

There are many curious incidents happening in connection with 
banking that might properly be gathered under the newspaper heading 
of "Lost and Found." I remember a case where the Paying-Teller of 
a bank was told by a customer, to whom he was paying the cash for a 
check of $500, that he had passed him out only $450. The bills laid 
upon the Teller's counter — had not been removed from thence by the 
customer. So he passed them back to the Paying-Teller, saying : 
" There they are; count them for yourself." The Teller counted, found 
the money $50 short, and passed out another $50 bill. Soon after 
another customer came to this counter. Looking down, he saw, upon 
the floor, standing upon its edge against the partition, a $50 bill, which 
he picked up and passed to the Teller, simply remarking: " You seem 
to be very careless with your money here." The bill had been lost on 
its short trip from the Teller to the last check collector. 

This little incident brings forcibly before us the question of owner- 
ship of valuables — money — found within a bank, yet outside of its. 
counters, by persons who happen to be calling at the bank. 

The premises of a bank, outside of its counters, is a public place. 
"Finding" there is the same thing as finding on the highway. The 



,24 PRACTICAL BANKING. 

person who picks up money there should, of course, report at once to 

"the bank. There is every chance that it belongs either to the bank or 

some of its customers, who will miss it, and be coming to the bank in 

search of it. If in the end the bank can show no claim to it, and no 

other owner appears for it, it reverts to the finder, who has all the claim 

to it that State laws will allow him. 

The statutes of the various States governing "finds" vary much. 

They generally provide for action under such circumstances somewhat 

of this character: The person who finds property of value above a 

certain sum — say $5 — must make the most strenuous endeavors to find 

the owner by advertising and registering. If, after a long time, no 

owner is found the money astray goes to the finder and State in equal 

proportions. 

BOTH SIDES OF THE GRATING. 

Of a kindred nature to our last case and yet with a vital difference 
is the incident of which I find the following mention in a London paper : 

He said, being in the witness-box when he made this statement, that 
he was a London barrister. He received a notice from the London & 
County Bank that a bill for £43 10s., of which he was the acceptor, 
would fall due on the following Saturday, and he was requested to come 
down to that bank between 2 and 3 o'clock P. M. , on the Saturday 
named and pay it. He took his money to the bank on the day and 
hour named, together with the notice that had been sent him, and, 
according to his own positive swearing, passed the whole through the 
Teller's opening in the bronze railing and demanded his voucher. A 
stranger standing by put out his hand, stole the money and decamped. 

The Teller of the London & County Bank swore out of the witness- 
box that he saw nothing of the money, that it could not have been 
pushed through the opening, and that, if it was brought to the counter 
at all, it must have been laid down outside of his railing. 

The whole question seemed to turn on the point of whether the bank 
really ever had possession of the money or not. The weight of the 
testimony seemed to support the idea that the money did not get into 
the hands of the bank — that it was in the custody of the barrister when 
it was lost, and a verdict was rendered accordingly. 

I relate this because incidents in practical banking repeat them- 
selves, and we cannot too often warn Tellers and dealers against 
repetitions of such rascality. I add also a couple of such cases of 
which I have personally known, and call attention to the fact that the 
accomplished clerk on the inside of the grating appears to have been 
the careless man in these cases, from which we judge that neither party 
•can be too particular in manipulating cash passing between them. 

Bank Directors are in the habit of going behind the counters of 
their bank — of passing around among the different departments, visiting 
the Cashier and the various officers, sometimes for the purpose of seeing 
Iiow the machinery of banking is running, and often for the purpose 



THE PAYING - TELLER AND HIS CASH. 25 

of having little items of their banking business attended to. A leading 
Director, who afterwards became the President of the bank, came to 
the desk of the Paying-Teller by this inside Director's route of which I 
have spoken. His errand was in part the collection of his check on the 
bank, which he held in his hand. The Paying-Teller was busy, and so 
the Director laid his check upon the Teller's desk unobserved by the 
Teller, and passed on to another department of the bank, intending to 
return in a few minutes for his money. The Paying-Teller soon saw 
the check left by the Director. At the same time he saw a gentlemanly 
appearing man standing in a waiting attitude outside his counter at the 
opening where the Teller interviews the outside world and passes them 
over the cash. He jumped at once to the conclusion that this outsider 
was the holder of the check mentioned, had passed it in and was 
waiting for his money. The Teller paid the amount of the check to 
the cool and gentlemanly outsider, who at once passed out of the bank 
with the money and was never heard from in that bank again. The 
Director soon turned back to collect his check, and the blunder was at 
once revealed. In the end the Director was paid the amount of his 
check, which was charged to the unfortunate Teller. 

Another Paying-Teller, who was a very careful officer and with long 
experience in banking, was in the habit of handling, at the time of 
which we are writing, a very large amount of cash gold. There were 
then no coin 'certificates or Treasury notes, and all settlements between 
banks and all customs duties were paid in the solid gold. Some dealer 
with the bank passed in his check for $2,500, and asked that it be 
cashed in gold — made this request of the busy Teller and then patiently 
waited for the gold coin to be passed out to him. Soon the bag of gold 
was shoved out through the aperture. A few minutes after the pay- 
ment the Teller glanced up from his work and saw the $2,500-check 
man still standing before the Paying-Teller's opening in an apparently 
waiting attitude. The Teller looked at him inquiringly, and was told 
by the customer that he would like his gold. The startling revelation 
was then made that the wrong man had taken the bag of gold from 
under the eyes of both Teller and check-drawer and walked out of the 
bank with it upon his shoulder in regular bank Messenger style. This 
was afterwards testified to by a bystander. Search for the thief and 
the money was unavailing. The bank assumed the loss on the ground, 
I suppose, that it was one of the legitimate risks of doing a banking 
business, and deducted the amount from the Paying-Teller's salary. 
Yet any practical banker must see that there was carelessness both on 
the part of the Teller and the check-drawer which this story may lead 
other Tellers and check-drawers who read it to avoid. 
THE TELLER AS A DETECTIVE. 

The Paying-Teller was a thousand dollars short at the close of a day 
of active payments, and, after he had exhausted every means at hand 
for finding the missing money, and counted and re-counted, added and 



26 PRACTICAL BANKING. 

re-added until he was weary over the fruitless hunt, he began to try to 
recall, as Paying-Tellers always will under such circumstances, all the 
paying-out transactions he had gone through during the day with a 
view of discovering what may be termed an individual location of his 
loss— that is, he tried to think of some cases in that day's work where 
he had cashed checks in a way that might account for the missing 
thousand dollars. After much reflection he suddenly came to the 
conclusion that the deficiency was caused by over-paying a small check 
which he had cashed for a man in humble circumstances, a hack-driver 
who lived in a remote part of the city. Firm in this conviction — really 
positive in the matter— he hunted up the poor hackman, finding him 
on his box on a rainy night, and closely questioned him regarding the 
transaction he had that day with the bank. The driver assured the 
Teller that he had only the money belonging to him, and, as if to prove 
it, hauled out of his pocket the roll of bills in just the shape (as he 
said) that the Teller had paid them to him. There was nothing more 
that the Teller could do in this direction ; but he came away from the 
man confident that he had placed that thousand — confident, too, that 
he was a hard and suspicious looking character. A week or two after 
this, when the Paying-Teller had become thoroughly discouraged over 
the prospect of finding the " short," a very honest old gentleman, living 
back in the country, came into the bank and paid the Teller a thousand 
dollars which he said had been over-paid him on the day of which we 
have been writing, and which, for some reason or other, he had not 
promptly discovered and reported. Paying-Tellers are sometimes apt 
to be too confident in their theories when they come to the work of 
"thinking up" the location of an over-payment ; and they are also 
sometimes mistaken when they attempt to judge men by appearances. 
In the case we have just described we have an illustration of both of 
these points. 

But the Teller is not always mistaken, and we balance the last 
anecdote with the following : 

It was a check for one hundred dollars, and the presenter of it said 
he would like it all in ten dollar bills. The busy Paying-Teller, by one 
of those lapses which will happen to the best of Tellers, reached his 
hand into the wrong division of his cash drawer — into the partition 
holding the hundred dollar bills — and passed the check collector ten 
one hundred dollar bills. The man took them, counted them, passed 
out of the bank, and continued on his travels to a distant city, for he 
was by profession a commercial traveler. At the close of the day's 
business, when the Teller settled his cash, he found it nine hundred 
dollars short. He then ran over the various paying-out transactions of 
the day, and soon vividly recalled this hundred dollar check affair and 
the blunder he must have made in connection with it. Such things 
will sometimes flash back upon the minds of experienced Tellers with 
wonderful clearness. He at once knew the man who had received his 



THE PAYING - TELLER AND HIS CASH. 2? 

But the thing now was to find him. It is sufficient to simply- 
say that he was found and, on refusing to pay back at once the money 
which belonged to the bank, was arrested on the charge of having $900 

in his possession belonging to the Bank. The man was as much 

a thief as if he had put his hand directly into the till of a bank and 
stolen outright $900. The man who is over-paid by a bank, and who 
does not promptly report such over-payment to the sufferer, is by the 
rules of law, equity and common sense deemed guilty of open robbery. 
Yet there are those who sometimes seem to be hardly aware of this. 

RAISED CHECKS. 

He drew a check upon a bank for $50 in his usual neat and careful 
manner upon one of his regular check forms. Neither the paper, the 
ink nor the filling up were of a character to aid or encourage fraud. 
Yet, nevertheless, this check was manipulated in a fraudulent manner. 
After having passed out of the hands of its payee, bearing his indorse- 
ment, it fell into the clutches of a rogue who removed with acids the 
$50 and inserted $1,000 in its place. In this altered condition the check 
was presented to the bank upon which it was drawn, and, by request 
of its identified holder, who was the raiser of the check, it was certified 
good for the raised amount. In this certified condition it was cashed 
for the full sum by an innocent party and by him deposited in another 
bank, from which it came through clearing k> the certifying bank for 
collection. Bat this bank had, in advance of its presentation, dis- 
covered that the check was a fraud and refused to pay more than $50 
for the check, this, the original amount, being all that could be charged, 
upon it to the depositor who drew it. Here was an interesting compli- 
cation. In the end the drawee bank was sustained in the position it 
had taken and obliged to pay only $50. The loss of the $950 fell upon 
the innocent party who had first been victimized. And this is where 
losses of this and similar character are always placed. The man who 
in good faith was unfortunate enough to cash for another a check 
which had been raised from $50 to $1,000 lost the difference between 
the two sums, his only recourse, which was to the party for whom he 
cashed the check, being of no value, since the scoundrel could not be 
found. The fact that the bank had certified the check as good for 
$1,000 did not help him, since the law does not hold banks liable in 
such matters where they have exercised proper care any more than it 
would if they cashed a check bearing forged endorsement. A bank is 
responsible for the signatures of its drawers, but it cannot be supposed 
to know the signatures of endorsers nor whether a check may or may 
not have been ingeniously raised. For these last contingencies the 
reliable, identified person for whom they have cashed the check is fully 
responsible. 

The certification in the case in question did not help the matter as 
far as the last holder of the check was concerned and did not prejudice 
the bank in the least. Tf the bank had paid the full face of the check 



28 PRACTICAL BANKING-. 

on its first presentation it could have demanded the $950 back from the 
collector. In certifying instead of paying it certainly placed itself in 
no worse position than if it had immediately paid the $1,000. 

THE TELLER WHO WAS SHORT. 

He was the Paying-Teller of the largest bank in a leading city, had 
held that position for a long time, and was considered an able, honest 
and most faithful officer. He worked early and late and was somewhat 
noted for the rapidity and correctness with which he handled money 
in payment of the checks drawn upon the bank. 

One morning the Teller of another bank upon the same street came 
to the desk of this Paying-Teller and said he wished to report to him 
an error of three cents which he had made several days before in a 
transaction between the two banks. The report and the rectification 
were received with apparent gratitude by the Paying-Teller, who said 
that he had been hunting everywhere for many days to find that three 
cents. 

It is a curious fact that this little incident happened just at the 
time when the Paying-Teller was at the end of his rope, as it were, 
after a long period of irregularities in his department. The day of 
exposure, disgrace and punishment was at hand, and on the forenoon 
when he made this remark about the long hunt for three cents he hung 
himself in the basement ©f the bank. When his books were examined 
he was found to be a defaulter to a large amount. 

The experienced banker who has been brought into close connection 
with bank officers who, undiscovered, were engineering along defal- 
cations can generally testify that the most remarkable thing about 
these defaulters has been the coolness and self-possession they have 
shown while up to their eyes in wrong-doing. 

GOLD AND SILVER. 

An experienced Paying-Teller will give you many interesting as 
well as surprising facts regarding the weight, bulk and supply of 
gold. 

Eight thousand million dollars' worth of gold are now said to be in 
use in the world. In such statistics as these we shall be satisfied if we 
get within a few dollars of the truth. 

The total product of gold from the earliest times amounts to 
$14,000,000,000, so it seems $6,000,000,000 of gold has disappeared. 
Now comes up very naturally the curious question, Where is it ? since 
nothing made from gold is ever intentionally destroyed and the noble 
metal is peculiarly indestructible. In olden times immense amounts of 
gold were used in ornamentations for temples for religious worship. 
What has become of all those articles made of solid gold of which we 
read which adorned those ancient edifices ? Where are the golden 
altars, the candlesticks and the clinging vines, all of solid gold, of 
those ancient temples ? In those f ar-off days of the past vast amounts 



THE PAYING - TELLER AND HIS CASH. 29 

of gold were used for personal decorations. The painter and the 
historian have given us glowing pictures of Cleopatra floating down 
the Nile, reclining amidst her slaves and admirers in scanty attire, 
loaded with ornaments of gold. What has become of all this twenty- 
four carat fine ancient jewelry ? 

Gold, as a metal, has some very peculiar characteristics which 
certainly are not fully understood, and which are, in fact, subjects 
of discussion and dispute even among the eminent scientists who have 
given them most attention. Some philosophers have advanced the 
idea that it evaporates. Though the most ductile and the most 
completely proof against fire and rust of all the metals, it is, at the 
same time, wonderful stuff for wearing out. 

If you will tell me what has become of the gold of which your 
watch-case was made for which you paid $40 twenty-five years ago, 
buying it by actual weight, and which will not to-day bring you over 
$30 if again sold by weight, I think I can answer the hard gold 
conundrums I have just raised. But the fact, statisticians say, is as I 
have stated : fourteen thousand millions of dollars worth of gold is the 
total product from the earliest times, and only eight thousand millions 
are now in existence. 

Those who have not looked into the matter will be surprised at some 
figures regarding the space needed for storage of gold. A million of 
gold in $5,000 bags occupies only about eight cubic feet and one hun- 
dred thousand dollars in $5,000 sacks can be piled in 1,440 cubic 
inches, so that if we dispense with the canvas bags and dump in coins, 
ornaments and bullion in one solid mass, one of our modern banking 
rooms, say about 80 feet by 50 feet, with a height of 16 feet, would hold 
all the world's stock of gold— the entire $8,000,000,000, but it will be 
well to select for the experiment a room pretty near the basement story 
as it will need to sustain a weight of nearly 15,000 tons. 

An ounce of gold may be said to be worth, intrinsically, all the value 
it commands, either in use as coin or as employed in the arts, since 
every dollar's worth of it represents a dollar's worth of labor in digging 
it from the earth, stamping it out of the quartz rocks, or washing it 
from, the sands. And, according to the appearance of things, a present 
dollar's worth of gold will, before long, be worth more than a present 
dollar. 

On the one hand we find decreasing production of gold, and, on the 
other, increasing consumption. The decrease in production has been 
steady, constant and important, since 1861. 

In the five years, including and ending with 1861, the world's annual 
production of gold averaged 695 millions of dollars ; in the next five 
years the average dropped to 680 millions ; in the five years ending 1871 
to 640 millions; in 1876 to 590 millions; in 1881 to 535 millions; in 1885 
to 425 millions. These striking figures indicate in a most unmistakable 
style the gold drift of the period. Unless some new and undreamed-of 



30 PRACTICAL BANKING. 

plantations of the king of all metals are shortly discovered we shall 
find gold rising materially in price the world over. 

Pure gold is a very soft substance, and cannot well be used in 
jewelry, such as watch chains, watch cases, etc. , without being hardened 
by an alloy to about 14 carats. Used as coin, it must be hardened some- 
what or it would wear out too fast. So the American double-eagle 
and the subsidiary American gold coins are alloyed with copper to a 
standard of 21 6-10 carats. Australian gold coins are alloyed with 
silver, and American gold coins were formerly alloyed with this same 
metal. English and French gold coins are slightly finer than our own, 
having a standard of 22 carats. 

I learn that eight millions of gold are annually consumed in the arts, 
and the latest figures I have seen make the gold coin of the United 
States worth $287,000,000 and the silver $112,000,000. 

Manufacturing jewelers, in melting and working gold, obtain their 
supply of the precious metal by buying old gold in whatever manu- 
factured shape it may present itself — in ingots, which are simply masses 
of uncoined gold, and in bullion and coin. 

The American double-eagle, which is a favorite piece with consumers 
of gold in the arts, weighs when fresh from the Mint 21| pennyweights. 
Pure gold is considered worth $1.04 a per ny weight. As the standard 
of the double-eagle is 21 6-10 carats it will be readily seen, by a calcula- 
tion, that it is worth $20. That is, our American gold coins have not 
the slightest fiat element in them. When new they are worth to melt 
just as much as they pass for as money. 

Bullion gold is not readily obtainable in Boston, but plenty of it can 
be got in New York city, and in Newark, both of which places consume 
vast quantities in the arts. 

The term carat, of which I have made use, needs a little explanation. 
It comes from a Greek word, signifying a berry, which was by the 
Greeks used as a weight of four grains; and hi this country and in 
England, when carat is used by the jewelers to express weight, it stands 
for four grains. In Germany and France it varies from this. But the 
term carat is more frequently used as above to express the purity of 
coin and manufactured articles which are made wholly or partly of gold. 
The whole mass is divided into twenty-four parts and is called gold of 
as many carats as it contains twenty-fourth parts of pure gold. Thus 
a coin of which twenty-two twenty-fourths is pure gold is called twenty- 
two carats. 

The question of the relative value of gold and silver is one that greatly 
interests all classes. I suppose that most readers are perfectly well 
aware that silver has been steadily falling in price for a long time. 
The dollar silver coin, which is current in this country, is down among 
the seventies on the world's exchange. The reasons for this decline of 
silver, or this relative enhancement of the value of gold, are many. 

Silver has fallen in value because the demand has not kept pace 



THE PAYING - TELLER AND HIS CASH. 31 

with the production while gold has more than maintained its old-time 
position because, as we have said, the demand for it has increased 
while the production has been falling off. 

Far less silver is used than formerly in art and in mechanics. 

This is particularly true of the silver situation in England. Much 
less silverware is now made and sold in England than in former times. 
Business depression is a leading cause of the decrease there in the use 
of silverware in families ; but fashion has had something to do with the 
change. Then again the growing custom of using silver-plated ware in 
place of the solid article exerts a great influence. The popularity of 
silver-plated ware has been increased by the great skill and thorough- 
ness shown in late years in its manufacture. Many good housekeepers 
see little necessity of buying solid silverware to tempt thieves, when 
plated silver that looks as well can be obtained so cheaply. On the 
other hand there has been a steady increase in the art demand for 
gold. I have been cognizant of a grim fact (or claimed fact) regarding 
the art demand for pure gold, that has not attracted very wide atten- 
tion. It is asserted that in these days of poor teeth the average adult 
has at least a dollar's worth of gold in his mouth, and that, conse- 
quently, every generation buries in the cemeteries of the United States 
$50,000,000 in gold. It may be that in England more economy is 
shown than here in the disposition of dental deposits, for I have seen 
in London stores any quantity of old false teeth on sale for the gold 
that was fixed in them. In the London "Times " it is very common to 
see a long list of advertisements of second-hand clothing and second- 
hand false teeth for sale. 

THE TELLER'S SPECIE. 

The gold in our banks is generally in charge of the Paying-Tellers, 
and lies ^iled in bags containing $5,000 each. Each $5,000 weighs 
twenty-two pounds. Standard gold is worth $18.96 an ounce, and one 
reason for great respect for this noblest of all the noble metals comes 
from the fact that it has varied but a trifle in price since the discovery 
of America by Columbus. The bags of gold taken on by the Paying- 
Teller, from whatever source they come, are by him invariably 
examined and weighed. That is, it must be poured from the bag 
which holds it into a scale and poured back again into the bag. This 
is done for two reasons. It is not safe to take on gold coin and salt it 
down in a bank vault, without making a face to face examination of it 
to see if it is the genuine article. The Teller cannot see through a 
bag, so he turns out its contents, and thus assures himself of the 
quality as well as the quantity of his last invoice of the precious 
metal. 

In the days of the State bank system and before Clearing-House 
methods were introduced into this country, in one of the large New 
England cities, the daily settlements of debits and credits between the 
banks were made in gold which was carried from bank to bank, in 



32 PRACTICAL BACKING. 

$5,000 bags, on the shoulders of the messengers of the period. In 
time the Tellers grew a little careless in their manipulation of the gold 
which was doing this balancing duty and the result was that a bag filled 
with old copper cents gave some defaulting Teller a good profit by- 
doing duty as gold for nobody knew how long until it was finally 
brought up with a short turn by a Paying-Teller who took time to 
examine the inside of the bag as well as the tag on the outside. 

Then, bags vary in weight, but it must be only a slight variation, 
and if on weighing a $5,000 bag of gold it is found to fall short in weight 
one-half of one per cent. , the Paying-Teller institutes a search for the 
under weight coins which have thrown discredit upon the whole bag by 
their individual deficiencies. His experienced eye at once detects the 
light coins which almost invariably show their lightness by their worn 
and smooth appearance, though there are occasionally instances where 
clipped coins turn up to account for the default in the bag. If they 
are short in weight from sweating or clipping they are returned as 
uncurrent to the party depositing the gold, and good coin taken from 
him in exchange. If the bag turning up short is the property of the 
bank, with no recourse to any one for reclamation, the reduced coins 
are taken to specie dealers and sold for the melting pot for the most 
they will bring. 

When a short weight gold coin gets by chance into the hands of the 
United States Treasurers they are by United States law compelled to 
stamp it short upon its face, and thus summarily end its travels as 
money. 

Clipping of coins, of which we have spoken, is just what its name 
would indicate — the simple act of reducing its size by cutting pieces 
out of it. 

There is a process for debasing gold cobi which is more difficult of 
detection. The pieces are sometimes split open, gold taken from the 
inside of both pieces, lead or some other heavy, base metal, put in its 
place, and the two pieces again deftly soldered together. The sweating 
of gold, which you frequently hear mentioned, is a very ancient mode 
of cheating. It is done by placing the gold coins in a strong bag and 
shaking them long and patiently. I have heard that this fraudulent 
operation was at one time carried on by the aid of some sort of a 
machine for shaking the bag. One not acquainted with the handling 
of gold coin would have little idea how easily it can be reduced, and its 
wearings saved by the process I have described. 

The natural and unavoidable sweating of the coin resulting from 
the ordinary and legitimate handling of the bags gives one a very good 
idea of the artificial sweating. Thus in weighing gold, in simply pouring 
it from the bag and pouring it back, quite an amount of gold dust 
can be detected upon the bottom of the scale dish. 

My Paying-Teller had occasion recently to weigh 850,000 in gold; 
and, after weighing it, brought to me, in illustration of the very 



THE PA YING - TELLER AND HIS CASH. 3$ 

point of which I am writing, quite a hand-covering of the gold dust, 
which he had gathered from his scale. 

This point of the wear or abrasion of gold coin is a most interesting 
one. Gold can neither be handled or moved without more or less loss 
from this cause ; and in handling large sums it becomes a very appre- 
ciable item. I have been able to learn of a few cases where the extent 
of this loss was by the circumstances very clearly shown. 

Some years ago the great banking-house of Brown Brothers & Co. f 
of New York and London, shipped from New York to London in the 
usual way as regards handling, packing and ocean carriage of a million 
of dollars of gold in coin. By one of those sudden swings in the current 
of exchange between England and America, which are not infrequent,. 
it was found, before the gold had crossed the Atlantic, that the most 
profitable exchange use of that $1, 000, 000 in gold could be made by order- 
ing it returned to New York at once in unbroken bulk — in its original 
unopened boxes. The steamer that bore it to London was met by a 
cablegram that had passed it on its way, ordering the immediate 
reshipment of the gold to New York — which was promptly done, and 
back it came to Wall street in the original packages. 

The net loss to the New York house from the abrasion resulting from 
the round trip was l-57th of one per cent — just $175. 

A great New York shipper of gold, who has had these figures which 
I have just given under his consideration, tells me that his experience 
(a long one) in shipping gold to and from London has taught him to 
expect an ocean voyage abrasion loss of about $186 on every million. 
But there is a difference of opinion among our gold shippers regarding 
this matter. 

Our Paying-Teller, however, knows that gold is so easily worn and 
defaced that it is very judicious to handle it carefully and in the right 
way. When put in these $5,000 bags, which I have described, it must 
not be tied too closely. Space must be left between the string and the 
gold so that the coins may have a chance to swim around loosely when- 
ever the bag is moved. If tied closely the coins will cut and wear each 
other and also strain harder upon the bag. The simple tying of a bag 
of gold is an art. They are to be opened whenever they pass into new 
hands, and Paying-Tellers look for a peculiar, handy knot in the string, 
which can be easily untied without cutting, and the absence of such 
assures them that some green hand has last had the bag. I have heard 
an experienced Paying-Teller say he should like to go up and down 
among the banks telling bank officers how to bag gold, inexperienced 
ones having caused him so much trouble. 

In some banks it falls to the lot of the Teller to make up parcels of 
gold for shipment to foreign countries. In shipping gold coin to 
England the shipper generally sends American double-eagles. He 
selects these because, being a large coin, there is less shrinkage on 
them. If they cannot be procured he takes the next best thing, which 



34 PRACTICAL BAXKIXG. 

is the ten dollar gold piece. These he generally packs in rather small 
size boxes made of very thick pine boards. Sometimes the coin is put 
into kegs about the size of nail kegs. In both cases the packages are 
sealed. 

The experienced shipper has a very neat way of sealing his boxes 
"which is worth remembering. He sinks the heads of the large screws 
well down in the boxes and then covers them with his seal of wax. 

When put on board ship specie is generally placed in the run of the 
vessel, and large shippers of gold have told me that special care is 
sometimes taken to keep from those on board the ship the fact that 
specie forms a part of the cargo. But the pursers of our steamers 
must know all about such matters, and it is now the custom of the 
papers to report in detail all the movements of specie between this and 
other countries. 

When the American coins reach the other side they find themselves 
-situated pretty much as is the English sovereign — the one pound value 
-coin of England — when it comes to see us. They know nothing of 
dollars and cents in England. We do not count in pounds, shillings 
and pence here. Either coinage is uncurrent when away from home, 
.and becomes simply merchandise. Here, uncurrent coin is taken in 
charge by dealers in the article, who sell it to manufacturing jewelers 
for the melting pot, to travelers who are going to countries where such 
<coins are current, or to the Mints of the United States, where it is recast 
into current American coin. The coin and bullion we ship to England 
is treated in the same manner, except that the Bank of England and 
not the English Government has the monopoly of the coining and 
recoining of the Kingdom. 

If it is asked why our shippers of gold to Europe do not send bullion 
rather than American coined gold I reply that bullion of this sort is 
one of the most difficult things to find. "In fact," said a large shipper 
of gold to me, ' ' when we want it it seems impossible to get it. " 

In shipping gold from England to this country the shipper also 
hunts for American double-eagles ; but he finds few for the reason, as 
I have stated, that they are apt to be recoined as soon as they get 
there. But bullion gold he can get. The Bank of England has vast 
stocks of it from which are drawn the shipments of gold that England 
makes to all parts of the world. 

The Paying-Teller is sometimes called upon to pay out silver coin 
for shipment. But most of the silver that has been sent out of this 
country of late years has gone out in the shape of silver bricks. Once 
in a while silver coins are called for to ship to China to pay for teas and 
other commodities. 

A gentleman once left Boston in a ship bound for China with 
$18,000 in silver dollars in a few nail kegs which he kept with him in 
his berth all the long and tedious voyage. 

The Chinese will have nothing but silver. And they are very par- 



THE PAYING - TELLER AND HIS CASH. 



35 



ticular what sort of silver that is. At one time they would take nothing 
but the Mexican dollar. It is still very popular there. Our trade dollar 
was prepared to suit their taste. They possess wonderful skill in judging 
the merits of a coin. They have professional coin testers who will pass 
a keg of silver dollars through their hands with amazing rapidity, 
rejecting by the mere sense of touch the light weight or debased dollars. 
At home, our Paying-Teller may find before him counterfeit coins, 
especially of silver, that are really more handsome than the genuine. 

Here is the United States Mint test for determining whether gold 
and silver coin is good or bad. Use the liquids as near the edge of 
suspected coin as possible, that being the part most worn. A drop of 
the preparation will have no effect on genuine coin, while its action 
can be plainly seen on the counterfeit. Heavily plated coin should be 
scraped slightly before using : 

Test for Gold. — Strong Nitric Acid (368), 39 parts. Muriatic Acid, 1 part. 
Water, 20 parts. 

Test fob Silver.— 24 grains Nitrate of Silver. 30 drops Nitric Acid. 1 ounce 
Water. 

Here is a table of the standard weights of United States gold and 

silver coins : 



STANDARD WEIGHT OF UNITED STATES GOLD COIN (BY ACT OF CONGRESS, 
PASSED JUNE, 1854,) AND SILVER COIN (BY ACT OF CONGRESS, PASSED 1878). 


Gold. 


Silver. 


Dollars. 


Ounces. 


Penny- 
weights. 


Grains. 


Total 
Penny- 
weights. 


Grains. 


Dollars. 


Penny- 
weights. 


Grains. 


1 

m 

3 

5 

10 

20 

50 

100 

200 

300 

500 

1,000 

2,000 

3,000 

5,000 

10,000 

20,000 

50,000 


1 
2 
5 

10 

16 

26 

53 

107 

161 

268 

537 

1075 

2687 


1 

2 

3 

5 
10 

1 
13 

7 
15 

2 
17 
15 
10 

5 

15 
10 

10 


1.8 
16.5 

5.4 

9 
18 
12 
18 
12 

12 
12 


1 
2 
3 
5 

10 

21 

53 

107 

215 

322 

537 

1,075 

2,150 

3,225 

5,375 

10,750 

21,500 

53,750 


1.8 
16.5 

5.4 

9 

18 
12 
18 
12 

12 
12 


1 

5 

10 

20 

50 

100 

200 

'500 


17 

85 

171 

343 

859 

1718 

3437 

8593 


V4 
22^ 
21 
18 

9 
18 
12 
18 



I add also a few words regarding some unjust coin rules which have 
"been set up by the United States Treasury. 

Briefly stated they are these : If a standard gold coin, in currency 
sound, falls short one-half of one per cent, of its original standard 
weight, it is marked light weight the moment it reaches the United 
States Treasurer or any of his Sub-Treasurers. Having thus condemned 



36 PRACTICAL BANKING. 

it and by the stamp robbed it of its power to travel more as money the 
Treasury refuses to redeem it at all and thus turns it into simple 
merchantable gold. In this shape the holder finds that he must lose 
about three per cent, on it, that being the discount he must allow to 
the brokers who buy it to sell again to be used in the arts. 

Silver coins which have been clipped and bored are placed at a 
disadvantage by the United States Treasury in the same way. It will 
not pay for them their proportional value viewed as money coins. It 
condemns and drives them to the melting pot. 

In view of these facts, bankers, business men and others have 
petitioned the Secretary of the Treasury as follows : 

That your petitioners, representing the banking and financial interests in this 
locality, desire to call your attention to the inadequate means provided for exchang- 
ing mutilated gold and silver, and would respectfully suggest that, in view of the 
large amount of profit accruing to the Government by the coinage of silver, liberal 
regulations be made for the redemption by the Treasury of all gold and silver coins 
reduced in weight below the limit allowed by law. 

If you would instruct the various Assistant-Treasurers to receive all light weight 
gold coin and all mutilated silver coin, deducting from the face value of the gold coin 
presented five cents for every grain or fraction of a grain that was missing, and from 
silver five cents for every pennyweight missing, and authorize them to receive these 
light weight and mutilated coins in whatever sums offered, in a few months this class 
of coin would entirely disappear. 

It is not fair to compel the public to lose the difference between the actual and 
nominal value of silver, and, as over $9,000,000 was carried to the credit of the silver 
profit fund during the last fiscal year (1889), we think the Treasury can afford to be 
liberal in providing a fair means for exchanging and redeeming these coins. 

UNITED STATES TREASURY NOTES. 

These are known to bankers and to business men generally under 
several popular names, none of which fit them well. There is no 
particular propriety in labeling them legal-tenders, par excellence, since 
they are so no more than any other class of lawful United States 
money. Neither do they seem particularly entitled to the name of 
greenbacks, then* war-time popular nick-name, since their backs are 
not much greener in their hue than the National bank bills of all the 
earlier issues. But there is one name which bankers are fond of 
bestowing upon them, which is decidedly incorrect, and that is that 
of United States demand notes. It is a peculiar fact, and one that 
few holders of these notes have observed, that, unlike National bank 
or old State bank issues — in fact unlike all other paper money afloat in 
this country or abroad — they are actually not even payable on demand. 
These promises to pay, issued by a Government which was at the time 
of their issue in a great strait, simply read "United States will pay to 
bearer;" and this omission to say more — to mention the time when they 
would be paid — was without doubt more than accident. Other paper 
money of all lands reads "Will pay bearer on demand." There are 
about $346,000,000 in these notes now in circulation under legal-tender 
enactments which have never been repealed. Their denominations 
are $1, $2, $5, $10, $20, §50, $100, $500, $1,000. 

The silver option, which the Government holds, is what leads 



THE PAYING - TELLER AND HIS CASH. 37 

London to quote our Treasury notes at eighty-five cents, and bankers 
and others in New York and Boston to hoard gold whenever a panic 
conies or is threatened. 

Treasury notes are now redeemed by the United States Treasurer 
and his Sub-Treasurers in specie, but not necessarily in gold. 

Our Treasury notes are lawful money in every capacity in the 
United States ; yet in international exchanges — in the world's commerce 
—they are short of it by the world's difference in quotations of gold and 
silver. And so they will remain till they are made redeemable in gold 
or the world of exchange adopts a bi-metallic standard. 

NATIONAL BANK NOTES. 

They are promissory notes, payable on demand. They are in the 
law issued by a private corporation, for a National bank, though 
seemingly a public institution in many of its aspects, is nothing more 
or less than a private corporation. National bank notes are not lawful 
money. They are not legal-tender between man and man, yet they are 
between individuals and National banks, for National banks are obliged 
to receive them for debts due. All National banks are obliged to receive 
them from all other National banks in settlement of debts. Their 
denominations are $5, $10, $20, $50, $100, $500 and $1,000. The issue of 
National bank bills of less than $5 was stopped when specie (or silver) 
payment was set up. 

The National bank bill is redeemable at a central bureau in 
"Washington — and over the counter of the issuing bank — in lawful money 
(Treasury notes, gold and Bland dollars) ; their market value is therefore 
the same as the legal-tender Treasury note. They are receivable 
at par in all parts of the United States for taxes, excise, public lands, 
and all other debts due to the United States except duties on imports, 
and also for all salaries and other debts and demands owing by the 
United States to individuals, corporations and associations within the 
United States, except interest on the public debt and redemption of the 
National currency. 

The arrangements, which the National banks in Clearing-House cities 
make among themselves by which, under a Clearing-House plan" for 
which no special provisions are made in the Revised Statutes of the 
United States, they bind themselves to make their mutual settlements 
in lawful money, are elsewhere fully explained. In places where there 
are no Clearing-House arrangements, and no mutual plans, like a wheel 
within a wheel, for governing the banks in their dealings among 
themselves, they pay and receive from each other National bank bills 
(as the law directs) in the settlement of all their transactions. 

National bank notes are divided into three classes, as follows : 1. 
The old series bearing the small star-pointed seal, and signed by F. E. 
Spinner as Treasurer. 2. The series of 1875, bearing the scalloped seal, 
and signed by John C. New, A. U. Wyman or James Grilfillan as 
Treasurer. 3. The series of 1882, bearing the large seal (chocolate 



38 PRACTICAL BANKING. 

color), and signed by James Grilfillan or A. U. Wyman as Treasurer 
of the United States. 

Let me stop right here and figure out the coin standing of National 
bank notes. They are secured by, and issued upon, United States 
bonds — and well secured, because there are, estimated at par, $100 in 
United States bonds behind every ninety dollars of the National notes 
outstanding. 

Every National bank must keep itself in funds, at the redemption 
bureau in Washington, to redeem its notes in full whenever they turn 
up there ; and every National bank must also hold itself in readiness 
to redeem its circulating notes over its own counter. 

But what sort of a redemption is this ? That is what we want to get 
at. What are the notes to be redeemed with ? Why, in lawful money, 
of course, for that is what the law specifically demands. And what is 
lawful money in the United States ? That is a question easily answered, 
for the answer is all down in the law. Lawful money is legal-tenders, 
gold and silver dollars to any amount, and fractional silver to the extent 
of five dollars. So I have reached the bottom of the National bank 
note. I find it a silver bottom. Every dollar of the outstanding 
National bank notes can be lawfully redeemed in silver. Now this silver 
fact is of little conseqence just at this moment, because gold is not at a 
premium. But the moment gold does touch a premium, this silver 
option on the legal-tenders and National notes will be a very disturbing 
currency element. 

And now I face the main question. Is gold going to a premium ? 
That is what every one is asking. That is what no one can answer. 
" It all depends. " If we keep our exchange current all solid with the 
other side, gold will not touch a premium. If this great country will 
continue to send to Europe more of its wheat, corn, etc. , than it imports 
from there in silks, satins — all that long line of European products 
that are to-day pouring in upon us by every steamer — and, alas, 
pouring in just now at a time when we are holding our wheat too high to 
compete with Russia, India, etc. — and if investors on the other side 
begin to lose confidence in our shares and bonds — why then we shall 
be in a bad exchange rut, and gold will flow out from us and advance 
to a premium. 

But I think theorists are becoming too much alarmed over the gold 
and silver situation. I see no prospect of a character to cause immediate 
worry. This great, strong country is coming out all right. It has the 
ability to feed and clothe Europe, and its greatest city, New York, is 
soon to become the financial heart of the world. 

SILVER CERTIFICATES. 

These youngest of all the Treasury issues have come to be about as 

familiar an object in the cash drawers of the Tellers of our National 

banks as the common Treasury notes or National bank bills. They 

count in the reserve of a National bank, and must be received by all 



THE PAYING - TELLER AND HIS CASH. 39 

National banks for debts due. No National bank can be a member of 
any Clearing-House Association in which silver certificates are not 
received in the settlement of Clearing-House balances. They cannot 
be taken by National banks as security for loans, and it is unlawful 
to withhold them from circulation — to lock them up. These silver 
vouchers are issued under an Act of Congress of February 28, 1878, and 
all read payable on demand to bearer in silver dollars at the office of 
the Treasurer of the United States in Washington, this silver dollar 
being the standard dollar, of unlimited legal-tender capacity, weighing 
412. 5 grains, and of which there are now about 300, 000, 000 in circulation. 
The silver certificate is not itself a legal-tender, but it is so near being 
so, from the fact that it can be taken to the nearest Sub-Treasury and 
exchanged on demand for dollars that are legal-tender, that it 
practically does legal-tender work in our currency. 

They are always signed in facsimile by the register of the Treasury 
and the United States Treasurer. 

MUTILATED, AND COUNTERFEIT PAPER MONEY. 

Paper money, the world over, is all the time sinking into a mutilated 
and filthy condition. How to keep it in presentable shape, and at the 
same time keep it moving, is one of the hard conundrums of the day. 
In the United States, and in Europe, immense pains are taken to pro- 
cure for monetary use the strongest and most perfect paper. There 
has never been a time when such excellent paper has been used for 
paper money as is now used. But, along with the production of strong 
and fine paper money, has come a custom of handling it in the most 
careless and slovenly manner. It was not thus in the days of our 
grandfathers. They carried great calf -skin wallets, and in them care- 
fully laid, at full length, their money bills. Now-a-days we wad 
the bank notes and greenbacks in pinched porte-monnaies. We crush 
them in a heap, and jam them into trousers and vest pockets, along- 
side of keys and jack-knives. In fact, as a general thing, we use them, 
carelessly and roughly. We know we shall not keep them long. We 
seem to care only to keep them in a condition that will ensure them a, 
shape to pass to the next person. Let me suggest that as the com- 
munity in general is much given to denunciation of the worn and filtlry 
condition of the National bank and legal-tender circulation, it would 
greatly mend matters if it should at once begin to do what it can to 
keep our paper money smooth and clean, by handling it every time 
just as if it was made of a r delicate and perishable material, instead of 
treating it as it now too often does, as if bills were made of india rubber 
or leather. 

Once in a while a bank bill of old date comes into our hands that 
shows careful usage and remarkable preservation. 

Fifty years ago the wife of a wealthy and liberal city merchant sent 
her minister's wife in a letter a present of a fifty dollar bank bill. 
All the parties to the transaction died long ago. A while since the 



40 PRACTICAL BANKING. 

fifty dollar bank bill was discovered in the very same old letter in 
which it was sent to the minister's wife — found among her books and 
private papers. It came into my hands as smooth and bright as when 
first issued, and I redeemed it. She certainly had taken good care of 
the original gift, though we cannot say much for the way she had 
looked after the interest account. 

The Paying-Teller can do his part of the good work if he will make 
a point of keeping in stock as nice, new and bright an assortment of 
bills, large and small, and gold and silver coin of the current denomin- 
ations as it is within his power to secure. I am now referring, of course, 
to the supply of miscellaneous cash he carries in his trunks and drawers 
to meet what may be termed the demand of the retail branch of his 
trade — to cash the checks, which are generally small checks, to meet 
personal wants, that are paid over his counter. I happen to know the 
Paying-Teller of a large bank, whose general management is a model 
of system, and who shows his views of neatness and order in his busi- 
ness by fully carrying out this idea. His customers often speak with 
satisfaction of the fact that their Paying-Teller always manages to pay 
them in clean and unmutilated bills and change, even down to cents, 
that is fresh and bright. With a little pains, particularly in our large 
places, Paying-Tellers may make a marked improvement in this respect. 
New small bills, silver and cents, may, with very little expense, be 
obtained for old ones at -the United States Treasury. 

But let the National bank notes and legal-tenders be used as care- 
fully as possible, they will still wear out; they are made of light 
weight and of perishable materials. 

Every person will at times find on his hands worn, filthy and mutil- 
ated notes. Now what is the precise status of such? What are the 
rules of the banks and the banking department in redeeming notes 
that are evidently unfit for circulation? 

If the whole face of the note is present and in a condition to permit 
of the recognition of its parentage, it will be promptly redeemed at full 
face value, no matter how dirty, worn and defaced it may be. It is 
not even necessary that the signatures of the President and Cashier 
shall be decipherable upon them. If every signature, written or 
engraved, that had originally stood upon the note had been washed or 
worn off the bill would yet be redeemed. 

But, if portions of the paper itself are missing, the Government is 
very particular in its treatment of them. 

What its precise rules are in these premises we will here set down, so 
that every body handling fragmentary bills shall know their rights in 
this redemption business. 

If not more than two-fifths of the paper is gone, and the note shows 
the name of the bank, and the signature of one of its officers, it will be 
redeemed at full value. 

A fragment of a National bank note, which does not clearly amount 



THE PAYING - TELLER AND HIS CASH. 41 

to two-fifths of the original paper, is not redeemable at all, either by 
the banks or the redeeming bureau at Washington, unless a satisfactory- 
affidavit can be presented, showing that the balance of the note has 
been destroyed. In this case the bill will be redeemed in full. 

Where a fragmentary note amounts to two-fifths or more, ar d not 
over three-fifths, the National banks redeem it at its proportional value, 
or, rather, at as near its proportional value as they can, and still be in 
harmony with the Government rule that the valuation of the fragments 
shall be equal to the face value of some denomination issued by the 
bank, or some multiple thereof. 

In a word, all fragments of bills of two-fifths and over and less than 
three-fifths are redeemed by the National banks at proportional value 
as near as it can be got at by a payment that is a multiple of a dollar, 
or is of the amount of some denomination issued by the bank. 

When a National bank has redeemed a lot of fragments of its own 
issue under these rules, it makes up the parcel of pieces into pieced 
bills. This it does by putting the fragments together, without regard 
to the denominations, reckoning the value of the pieces by the amount 
paid for them, and making up new bills equal to the face value of 
some denomination issued by the bank. 

The fragmentary valuation laws applicable to United States notes, 
legal-tenders, are not like those I have just described as belonging to 
fragmentary National bank notes. 

Fractional legal-tenders equalling or exceeding three-fifths of original 
proportions are redeemed by the United States and its Assistant 
Treasurers on a scale by tenths as below. 

When less than three-fifths remain, and not less than clearly one- 
half, they will be redeemed only by the Treasurer at Washington at 
just one-half full face value of the note. 

Fragments less than one-half are only redeemed when an affidavit 
is shown, proving that the rest has been destroyed. 

The circular of the United States Treasury gives the rule thus : 
" United States Notes, Gold Certificates and Silver Certificates are redeemable, by 
the Treasurer only, when mutilated to the extent of one-tenth, but not two-tenths, 
at nine-tenths of their face value ; two-tenths, but not three-tenths, at eight-tenths 
of their face value ; three-tenths, but not four-tenths, at seven-tenths of their face 
value ; four-tenths, but not one-half, at six-tenths of their face value. Fragments 
of notes, each constituting- clearly one-half, are redeemable at one-half the full face 
value of such whole notes." 

The old Treasury notes — issues prior to 1869 — were made of plain 
bank-note paper. The issues of a later date have been printed on fibre 
paper. Of the old issues counterfeits were more numerous than those 
of the new, though some dangerous counterfeits of the latter have been 
made. By exercising caution, however, in handling, bank Tellers 
need never be deceived by taking counterfeit bills. The Secret Service 
Bureau of the Treasury Department is now managed with such skill 
that advice of any new attempts to float "crooked" money is furnished 
to the bankers before the counterfeiters' plans can be put in operation. 



PRACTICAL BANKING. 



This advice is sent out to the banks through the several banking 
journals as promptly as received from the Chief of the Secret Service 
Bureau. As a rule the so-called " Counterfeit Detectors " are useless 
and misleading. If bank Tellers will make a careful study of genuine 
bills and use the information above referred to they need never be 
deceived. 

On page 43 is a copy of the measuring scale which the Treasury 
department supplies to the National banks for use in handling mutilated 
notes of the class named . 

All United States notes are printed in sheets of four notes of one 
denomination on each sheet. Each note is lettered in their respective 
order in the upper and lower corners diagonally oppsite, A, B, C, D. 
The Government system of numbering its notes results in a certain 
relation between the number and the letter of each note ; thus all notes 
of which the number when divided by 4 shows a remainder of 1 have 
the check letter A ; 2 remainder, B ; 3 remainder, C ; those numbers with 
no remainder, are lettered D. Any United States note upon which 
the number cannot be divided by 4 and show the above result is a 
counterfeit. 





TABLE OF 


COUNTERFEIT UNITED STATES 


TREASURY NOTES. 




All genuine Notes 
prior to 1869 were 
printed on plain 
bank - note paper. 
Since 186y on fibre 
paper. 


o 
. cute 

u „<£ 

0<Mt> 

1-1 m 
g 


§§ 
433 B 

*§£ 
"Em® 

Qj r. - 

r-lr-t 


ri 
Sri 

•ill 

|g 

iH 


SI* 


Vignette. 
1862-3, Liberty. 

Portrait. 
1875-8, Hamilton. 


Portrait. 

1862-3, Hamilton. 

1869, Clay. 

Viprnotte. 

1862, 

Spread Eagle. 

Portrait. 

1869, 
Adams. 


4 

3°, 

"1 




$1 


$2 


$5 


$10 


$20 


£50 


$100 $500 $100O 


O 

51 


1862. 


B 
C D 


B 
C D 


A 


B 
C 


A B 
C 


C 


B 
C 




A B 
D 


1S63. 






A 
D 


A B 
C D 


A 


A B 
C D 






A B 
D 




1869. 












B 






fa 
O 
w 


1875. 


D 


D 


A 
C D 


C 


A B 
C D 


D 








cc 


1878. 










A B 
C D 




1 






1880. 








D 











All the different series of the National bank notes have been coun- 
terfeited from time to time. 

We have seen published for the use of the banks an authorized list 
of all National bank bills which have been counterfeited so arranged 
as to show in each case both the Government number and the bank 
number of all bills of that denomination issued to that bank, and giving 
simple rules by which to infallibly decide by these numbers whether a 



THE PAYING - TELLER AND HIS CASH. 



4a 



44 PRACTICAL BANKING. 

given bill was good or counterfeit. All National bank notes issued 
prior to the series of 1875 bear the signature of F. E. Spinner as 
Treasurer. All National bank notes issued since 1875 bear the signature 
of John C. New, James Gilfillan or A. U. Wyman as Treasurer. 

Photography has not been successfully used either in counterfeiting 
National bank notes or United States Treasury notes, as the colors on 
these notes cannot be reproduced by photography. 

Of a more artistic nature than the use of lists, and requiring more 
skill is the detection of bad money by judging of the character of the 
engraving and printing. 

I recollect that on one occasion a man whom we might style a 
"Professor" in the art of detecting bad money came into the bank 
bringing with him a number of rather unskillfully executed counterfeit 
National bank-notes. These he showed to the Tellers, enlarging 
somewhat upon those points in the bills which revealed their 
fraudulent character, and solicited an opportunity to give to the 
officers for the sum of ten dollars special instruction in his "secret 
art " of detecting counterfeit bills. It needed but little conversation 
with this professor to convince the Tellers of what they suspected 
at the outset, that the man was an impostor. There are no secrets 
in the art of detecting counterfeits. There are no short roads to 
a knowledge of the business. Careful study, long experience and 
a natural aptitude for this work will make any bank officer an 
expert. One of the best schools for acquiring skill in detecting 
counterfeits existed in the Suffolk Bank of Boston at the time 
it was carrying on the business of redeeming the bank bills of all 
New England when an immense variety of issues of its State bank notes 
were in circulation, and out of that old "foreign-money shop" there 
graduated men who can to-day give points to any peddler of the 
so-called secrets of the art of detecting bad bills. The skill of these 
Suffolk sorters and counters was the outcome of long and patient labor 
combined with a natural talent for the work. There were some clerks 
in the "foreign-money department" who had labored in it twenty 
years who were the poorest sort of authority in this matter of coun- 
terfeit detecting, for they were naturally dull students in this field, 
while there were others with nimble fingers, sharp eyes, clear heads 
and marvellous cuteness who were the keenest sort of experts there. 
These last never made any mystery of the business of counterfeit 
discovering — never pretended there was any secret in the business. In 
time they could detect and condemn bad bills at sight with a facility 
which seemed wonderful to outsiders, but their skill was simply the 
result of a cultivated talent. 

Yet one more danger menaces the handler of our paper circulation. 
I refer to National Bank notes stolen when unsigned and put in circu- 
lation by the thieves. These are not redeemed either by the banks or 
the Treasury department except in a few exceptional cases where the 



THE PAYING - TELLER AND HIS CASH. 45 

bank has recognized its responsibility for the care of such bills and the 
impossibility of any individual identifying them as stolen and has 
honorably assumed the loss and relieved the innocent public. In cases 
where the circumstances are such that the parties who allowed them 
to be stolen in an incomplete state are not to be held responsible for 
them, Congress should make an appropriation for their redemption. 

BRANDING WORTHLESS BANK NOTES. 

Section 5 of an Act of Congress of June 30, 1876 requires National 
banks to stamp or write in plain letters the words "counterfeit," 
"altered " or "worthless " upon all fraudulent circulating notes which 
they shall get hold of. If by error they shall wrongfully thus mutilate 
any National notes and greenbacks, they must pay all damages. But 
such errors may be easily repaired by simply sending in for redemption 
the note improperly stamped — sending with it a statement of the facts 
in the case. 

This new law, like many other features of the National Bank Act, 
is but a copy of the law the passage of which through our State Legis- 
lature was procured by the able managers of the Suffolk Bank more 
than twenty years ago, at a period when the Suffolk system was in full 
activity, and its immense daily redemptions of country bank bills were 
requiring a larger force of bank clerks than it or any other Boston bank 
has ever employed before or since. 

This Massachusetts law, which was the prototype of the National 
law just mentioned, obliged the Suffolk to stamp indelibly every bad 
bill which fell into its hands, and this they did by getting up a sort 
of branding arrangement, in which a hot iron and some sort of very 
black liquid combined to give a condemned bill so bad an aspect that 
its career of "usefulness " as paper money was summarily ended. 

Previous to the passage of this ' ' stamp act," the effects of which we 
have observed, it was the custom of the foreign money clerks of the 
Suffolk Bank to place upon the back of every bad bill they received 
from a depositor a memorandum giving the date of its reception and 
detection and the initials of the detecting clerk. A record of the same 
character was also made in a book kept for the purpose, to which was 
added the name of the depositor to whom the bill was returned — for 
these marked and condemned bills were invariably afterwards returned 
to their owners with a full statement of the reasons for their refusal. 
The reason for making all these marks and records, and also the 
reasons for the subsequent passage of the law requiring the complete 
mutilation of bad bills, will be found in the fact that the returned, 
marked, numbered and condemned bank notes were very often found 
in circulation again, doing honest work in honest hands, having been 
wilfully and dishonestly put afloat by the depositors to whom they 
had been returned. 

By the aid of the marks and numbers upon their backs, the dishonest 
circulator could at any tune be traced out by the victims who under- 



46 PRACTICAL BANKING. 

stood the Suffolk system. When such detections were made, the rogues 
were quite in the habit of flatly denying the charge, or of declaring the 
paying out was entirely accidental ; but they always saw the necessity 
of taking back the bill at its face. Bank officers do not, so far, seem to 
have given the new United States law, requiring them to brand plainly 
all the bad bills that come into their hands, the attention it deserves 
and demands. A few of the banks in the principal cities have procured 
neat stamps, and specimens of their work have made their appearance ; 
but other banking institutions appear hardly aware of the requirements 
of the law, since they allow the dangerous bills to go back unmutilated 
to the parties who deposited them. 

The proportion of worthless National bills in circulation is very 
small when we take into consideration the volume of National bank 
circulation. Under the old State system, there was a far greater 
amount of counterfeiting ; and, as for alterations, a Teller of very large 
experience informs us he has never yet fallen in with a single altered 
National bank note. 



THE RECEIVING- - TELLER AND THE DEPOSITORS. 47 



CHAPTER III. 

THE RECEIVING-TELLER AND THE DEPOSITORS. 

This officer, who holds one of the most important of bank positions, 
besides good abilities, requires a natural tact and taste for handling 
money. He has a deal to do with the public and should have a large 
fund of patience and courtesy, since much of the good will of the bank 
may be said to be at his disposal. 

Dealers, in making their deposits, are apt to judge of the general 
tone of the bank by the carriage of the Receiving-Teller. He receives 
a less salary than the Paying-Teller, gives smaller bonds, and is con- 
sidered a standing candidate for the higher position of Paying-Teller. 

In fact, his position and duties are best understood if he is viewed 
as an assistant to the Paying-Teller ; for, in the system and philosophy 
of banking, he is really such, and nothing more nor less. His work and 
his books are best comprehended when considered as simply supple- 
mentary to those of the Paying-Teller. He stands at his counter and 
receives all the deposits made with the bank ; and, where there is no 
Note-Teller, all the money that is paid on the collection notes ; but so 
far as these receipts are cash they are handed over to the Paying-Teller 
with a proper record of the delivery and when they include checks 
which are given to a collection or correspondence department such 
funds are, with more or less detail, charged to the Paying-Teller, and 
thus put into his books and department. 

When the Paying-Teller takes vacations it is the Receiving-Teller 
who usually does his work. 

In active banks the Receiving-Teller's position is an arduous and 
trying one, and his responsibilities large. He should be fairly paid and 
well appreciated by bank and dealers. Customers can help him along, 
and at the same time help themselves, by paying notes, making deposits, 
and calling for certificates of deposits early in the day. 

The Receiving-Teller will find his duties greatly lightened by the 
adoption, on his part, of a thoroughly systematic method of the 
administration of his place. He stands at the gate of customs; and 
from all who pass over to him, for their credit on the books of the 
bank, cash, checks, drafts, coupons, or any kind of funds, he should 
require a carefully prepared accompanying description of the deposits 
made in the shape of deposit-tickets or credit-tickets, giving in detail a 
statement which shows of just what the deposit consists. These original 
tickets, after being carefully compared with the matter accompanying 



48 



PRACTICAL BANKING. 



them, and checked off, are filed awa^ by the Teller, and they often 
become exceedingly valuable for reference, in case differences and mis- 
understandings occur as to credit dealings with depositors. In many 

Fi rst National Bank 



6 j£.<^&. 




Deposits 






2,, 



/t> 



<r<r/c 

Z-oo 
<?. 

cJ~(s 



3 J- J 3 J \^J 



4j 









/J\7Z 



V7- 



J J- /.Z-/J 



Dr 



PAYING-TELLER 



Cr. 



/J~c 



sJ\0OO 

6 



6 



c3& 



<?7 



■r#o 













^{700 



6/ 



c 






t?js&\q £ 



{/a/.!**/ 6 6.; j 



/OO/y 









iL-Jr*u£ .2*6 2~<te 






6 6 



.Zfj^. 



y r / 



COLLECTIONS 






<&Uj 




/J. 



oVJ 



?trf 



cj 



Y* 



/< 



Jfr 



w^> 






CASH ITEMS 
BILLS 
COLD 
CtCARIWO 
CHANG C BOX, 






/" 



J>6 
/of/ 

J/* 



'J 



J^z 



/a #t 



2 






a 



Form 3— left-hand page. 

banks the Book-keeper makes most of his credit entries from these 
original tickets. 

The Receiving-Teller needs but a single book so ruled as to enable 
him to record the amount of each deposit or other receipt with the 
name of the account to be credited, and also including an account with 
the Paying-Teller. In the form I give (Form 3, right and left-hand 
pages), which is a very well-arranged sheet, and furnished by a bank in 
a Clearing-House city, the disposition of the checks received from 



THE RECEIVINGS - TELLER AND THE DEPOSITORS. 



49 



depositors is shown by the charges to the several banks of the Clearing- 
House and to collection agents at several country points while the cash 
has been made up into round sums and given and charged to the 



^^^a^, Jio^ ^t^, sSJtyo. 



CLEMUN&.H&LJSE 



Z 



/(a 2.4/ 

/J J-O 



**7 






417? 



fJ 



fo 



3 f 






*4? 



7J\ /.OCC 



/J 



9 



11 
/06 

•3 /ao 



L 



10 



12 



13 
//aC 



tu 



14 
JZ-c/ec 



4tu6. 



/J 



fa 



1/ 



Id 



Af^f-r 1 1 



<y?£a 



tJjO 



71.0 
6 



7? 



/.fuy 



/c^.^ui 



fj 



23 



•Jo.o 



25 



'ffujL 



/ 

tftTO 

ursao 

Z//-2- 

MKoao 
<f&3 



JUfrTfJ.Si 



j/<?^6ff 



,£ 



26, 



£cT.Zfj.J. 



Sundry Banks, 



,r 



/£> 

/ 

Jj\f6 

-&0/ Zf 
6.6-2-/ 



/?: 



CJZ) 

JZO 

£. fJ-J. J J 



JZod- &£> 



j&^-o z& 






-Vjf- 



cfld-t 



Man* 



V 



^7 



3s7<r 



yA 

/Jo 



CfoJ- 



'^JrCf OJ 



Form 3— right-hand page. 

Paying-Teller. To this account with the Paying-Teller also the footings 
of the various other accounts are finally transferred and the agreement 
of its balance with the cash remaining on hand at the close of the day 
proves the correctness of all the entries. 

While the Receiving-Teller is thus able to show on a single book the 
record of all his work he may nevertheless claim that he is required to 
make entries in more books than any other clerk in the bank, and make 



50 PRACTICAL BANKING. 

his boast good by producing the numerous pass-books of the depositors. 
As these are so continually in the foreground in this department let us 
give them a little consideration. The familiar standard form of bank 
pass-book now in general use is probably about as well adapted to its 
use as any of the bank stationery, but the manner of using it can in 
many cases be much improved both by bank-clerk and dealer. 

1. THE ENTRIES. 

Let every entry be made neatly and correctly. 

Their appearance in this respect is quite indicative of the character 
of the clerks who handle them. 

Then Tellers and depositors should co-operate in the endeavor to 
have every deposit entered upon the pass-book at the time it is made. 

If the dealer will always take the pass-book with him when he 
makes a deposit and carefully see that his deposit is correctly written in 
it before he leaves the bank, this point can very readily be lived up to. 

It is an excellent plan to have a bank rule that no deposits or credits 
of any sort shall be entered upon pass-books except by the officer who 
makes the original credit entries upon the books of the bank, which 
officer is the Receiving-Teller. Where entries are made, for instance, 
by discount clerk — entries of discount credits — he may forget to com- 
plete the business by passing over to the Receiving-Teller corresponding 
credit tickets, and thereby bring the books of the bank into confusion. 
There have been instances of wilful neglect of the character last named, 
which have been one of the many methods by which bank irregularities 
have been carried along and covered, up. 

Where running accounts are kept with out-of-town depositors, who 
are often sending deposits by mail, and who seldom find it convenient 
to have their deposits entered on a pass-book, pass-books should not 
be issued ; but, in lieu thereof, their mail remittances should be duly 
acknowledged, and an account current rendered at close of each month, 
just as is done in case of accounts with corresponding country banks. 

2. WRITING UP AND BALANCING. 

The most important thing that can be said under the head of pass- 
books is that they should never, if it can possibly be avoided, be 
allowed to run along month after month without being brought to the 
bank and balanced — verified with the books of the bank. Each month 
— say sometime during the first week of each month— the Book-keeper 
should bring to the Cashier a list of all the accounts which have not 
been verified by pass-books or acknowledged by letter, and the Cashier 
should then endeavor to secure the balance of the verifications. 

The depositor should always send his pass-book into the bank just 
before the close of each month so that the bank shall have time to 
write it up and balance it. And the bank should invariably have all 
these books promptly balanced and ready for delivery on the morning 
of the first day of the month. 

In a bank having many officers, it is a custom for all, or at least 



THE RECEIVING - TELLER AND THE DEPOSITORS. 51 

nearly all, of them to assist in this monthly work of writing up the 
pass-books. The deposits, discounts and other credits of the pass-books, 
are supposed to have been promptly written in as they were made. 
But the writing in of the checks and the striking of the balances can 
only be done when the work of the month has drawn to a close, and 
it must therefore come, as the bank officers express it, "all in a heap," 
and all the clerks who have any spare time for the work must bend 
to it and do all they can ; for, in every well-regulated bank, as I have 
said, all the pass-books which have been sent in must be promptly 
ready for delivery at the opening of business on the first of the new 
month. 

Although the work must mainly be done under the pressure for time 
which I have indicated the bank officer ought to bear carefully in mind 
that it is his duty to write up these books in a legible and easily under- 
stood style, both as regards the entry of the checks upon them and the 
work of striking the balances. The depositors have a right to expect 
that their books shall be thus manipulated, and the bank which allows 
slovenliness and carelessness to creep into this portion of its clerical 
work is in danger of falling into a certain degree of discredit with its 
dealers. 

The practice of entering the checks upon separate slips of paper, 
specially ruled and cut for the purpose, has, of late years, obtained in 
many banks. I see no particular objection to this custom; and it has 
its particular advantages, since it gives the bank officers a chance to 
work at writing up long lists of checks in advance of the return of the 
pass-books at the last day of the month, and also prevents the pass-book 
from being rapidly and unnecessarily filled with these details of charges. 

3. PROVING AND DELIVERY. 

Here we note a point of great importance relative to the management 
of the pass-books. Any of the clerks may write in them in this close 
of the month's rush, and may be allowed to strike the balances. But 
no pass-book should be delivered to the depositor by the Teller, through 
whose hands they are usually passed out, until the entering and the 
balancing has been seen by the Book-keeper, the balance checked off 
on his books, and some check mark, which the Teller recognizes, made 
upon the pass-book. 

In some banks the precaution is taken to have all the pass-books 
sent occasionally, or even as often as the close of every month, through 
the hands of President, Cashier, or Director, to be by him carefully 
checked off by the books or trial balance-sheet before their delivery to 
the depositors. This plan had its origin in great bank defalcations, 
where the pass-books had been written up correctly, while the books 
of the victimized bank were being thrown by dishonest officers into a 
state of the utmost confusion in order to conceal current abstractions 
by the defaulting officers. 

It is a matter of surprise that banks do not often and systematically 



52 PRACTICAL BACKING. 

obtain from their individual depositors some formal acknowledgment 
of the correctness of these accounts rendered them by the banks. 

Few banks neglect to secure from their corresponding banks 
acknowledgments of correctness of accounts as often as once a month ; 
yet, in the matter of pass-books, few banks do otherwise than drift along 
on the plan of accepting silence as consent — no report as equivalent 
to an acknowledgment. 

An experienced bank Cashier, located in New York State, adopts a 
very intelligent method in the management of his Depositors' pass- 
books ; and I doubt not there are other Cashiers who are doing 
something of the same sort. 

Not long ago this bank of which I speak, found that it had on its 
hands a suit of a depositor for quite a sum of money, based upon a 
claimed reponsibility on the part of the bank for an irregularity in 
pass-book and vouchers, which was of two years' standing. In all this 
period the depositor had received his pass-book and checks from the 
bank, and never, till the time of the suit, expressed a word of dissatis- 
faction with the balances shown and checks returned. 

But, in the lawsuit, the depositor won, whereupon his bank intro- 
duced an excellent method which I would recommend to all banks. 
It set up the practice of returning with every pass-book a slip of this 
style, which printed voucher each depositor must fill up and sign : 



H. F. JONES, Cashier. 

NATIONAL BANK OF THE UNION. 

Dear Sir: 

We are in receipt of your Statement of account, with 

vouchers, to ., closing -with balance to 

credit of $ 

TOO 

The same have been examined and are correct. 



N. B.— Depositors are requested to sign and promptly return this form, with the 
blanks properly filled. 



Form 4. 

I have in mind a pass-book story or two, from real life in banking 
and from real life, too, that has passed under my personal observation, 
which point the lessons I have been giving under this head. 

He came to the Cashier of the venerable Bank, bearing in 

his hand an old unbalanced pass-book, the last entries in which had 
been a series of pretty good-sized deposits, made fifty years ago. The 
book had belonged to his deceased father ; and somehow the son had 
got firmly imbedded in his mind the belief that there was still in the 
old bank a credit balance due that pass-book. The bank was a well- 



THE RECEIVING - TELLER AND THE DEPOSITORS. 53 

regulated institution that kept all its old books, checks, etc., and 
without stopping to question the validity of so old a claim, it hunted 
up the old checks and books, wrote up the pass-book, and returned it 
promptly to the presenter with a showing that proved that nothing was 
due to either the past or the present generation on that book. One 
more, and showing an ever-present danger. 

He kept a small account at Bank. He was, as it turned out, 

a "bad lot." By the error of a hurried Receiving-Teller, a credit for 
a §500 deposit which belonged to another depositor was made upon his 
pass-book. At the end of the month the mistake was discovered by 
the bank, and it endeavored to right it. But the man of the wrong 
credit declared the money was his, swore to the lie that he made that 
deposit, and threatened to sue the bank for the amount. The badgered 
bank, lame because it had made a radical error, and at a great disad- 
vantage because it was fighting a liar, finally concluded to pocket the 
loss and allow the stolen credit to the thief. 

Although I started out with the statement that the ordinary form 
of pass-book was very satisfactory, I venture to suggest some improve- 
ments in their construction which in part, at least, are new, and I trust 
worth looking into. 

The practice of entering the debits — the checks paid — upon a 
separate slip of paper, the slip being returned loose with the checks at 
the end of the month, is one which I have deemed allowable on the 
score of its great convenience to the bank. Yet the separation of the 
slip from the pass-book is a decided objection, since it is, for this reason, 
likely to be lost or destroyed by the depositor, although it is an import- 
ant record, and one that should be carefully preserved with the book. 
Here is a plan for remedying this defect : 

Have the pass-book built in what might be termed a skeleton form 
— made, to begin with, with good covers, one single leaf inside (two 
blank pages), and a sort of scrap-book arrangement of margins, by 
which leaves could be added every month. On the proper page of the 
first leaf enter all deposits as they are made. Then, at the end of the 
month, ' ' gluten " in, on the stub or margin which stands ready for the 
next leaf of the book, a second leaf, on one side of which has been 
entered beforehand, and at the convenience of the bank clerks, all 
the checks paid during the month. The book thus carried on will 
continually present a page ready for deposit entries, and a place for 
insertion of the written-up debit sheet. 

This plan will answer better than the one now in vogue, which 
requires the use of the separate and loose check slip. 

But there is another new pass-book plan, which I consider an 
improvement over the one I have been describing. It is particularly 
desirable for active accounts in large banks : 

Issue to every depositor whose transactions are many — who draws a 
great number of checks, and makes many deposits — two pass-books. 



54 



PRACTICAL BANKING. 



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56 PRACTICAL BANKING. 

One shall be a credit pass-book, upon which all deposits are made as 
they are entered; the other a debit pass-book, upon which shall be 
entered at the convenience of the clerks as before, and so as to be ready 
for the depositor at the close of the month, or oftener if desired, all his 
checks paid during the month or other period, the balance resulting 
from the transactions recorded on the two books, being struck — figured 
out — on the credit pass-book, this last being somewhat in the nature of 
a principal pass-book, and the other being a sort of supplement to it. 

I elsewhere give a description of the London system of banking and 
book-keeping, and have pointed out instances in which London banking 
methods might be copied in this country with advantage. 

See Form 5, right and left-hand pages, on pages 54 and 55, for a fac 
simile of a London pass-book (prepared by a London bank officer), 
which is an exact reproduction of the entries in the form in which they 
would be made in such a book. We find some curious and instructive 
features. The writer became so much interested in the study of English 
novelties in practical banking as to make a resolution, if he ever visited 
Europe again, to look particularly into this department of business as 
conducted in the different countries with a view of comparing their 
systems of practical banking with those in vogue in this country : 

This London book needs a few explanations. In the first place, my 
friend has cast a deep shadow on the fair fame of our London brother 
bank clerk by an error in bringing forward the balance of March 31, 
and by errors in the footings which follow it. 

Let us hope that the L. and W. Bank discovered that error in the 
balance in time to save the £200 which it cost them. 

Still, as a clear presentation to the eye of the appearance of an 
English pass-book our fac simile is very successful. Notice that it is the 
custom to balance such pass-books only once a quarter. It will also be 
seen that in it are recorded the names of the payees of the checks 
charged, and they are entered in the order of the dates of their pay- 
ments — both very good ideas. Another novelty in this book, and one 
which can also be recommended, is its method of entering discounts. 
Under date of January 30th is an entry which means to state a credit 
of a promissory note for £300, due the 3rd of May which had been 
discounted for this depositor. Under the same date the depositor is 
charged with the discount on this note, amounting to £3 15s. On May 
3d the dealer is charged with this £300 promissory note as it matured, 
and seems to have provided funds for its payment by giving a new 
note for £200 due 6th of August — see credit of May 3rd for that amount 
and charge of same date for its discount, £2 10s. The loan finally ends 
by the charge of the matured note, August 6. This pass-book is 
occasionally an overdrawn one, and on it there are charges for interest 
on overdrafts. See June 30th, charge on account of 17s. 6d. 

The book is closed by a transfer of the balance to the bank's branch 
at Bays water. 



THE BOOK-KEEPER'S DESK. 57 



CHAPTER IV. 

THE BOOK-KEEPER'S DESK. 

Here we shall find modern ideas, change, and progress. 

Probably many of my older readers will recollect when the printer 
did not help the Book-keeper as he now does in the work of making 
headings and listing names, and when every day called the Book- 
keeper to the long and monotonous task of writing the headings and 
lists of depositors' names in the cash-books. 

To-day, in all our large and most systematic banks, all the "writing " 
in the chief books of the institutions, which was formerly done by the 
pen, is accomplished by the printer in such a neat and ingenious style 
and arrangement that the working in of ever- varying figures is left as 
almost the sole clerical task of the bank-officer. 

It is now a matter of constant surprise to me that this neat and 
accurate use of type was so long delayed. 

After the cash-book entries were made and proved came the posting 
or transferring of the debits and credits on each account to the bulky 
ledgers, and this too is largely done away with. 

Very much of this saving of labor has come from the quite general 
adoption among city banks of the Skeleton Ledger as it is often called, 
or cash-book, journal and ledger combined; the "Boston system" as 
it is styled in New York. 

This form of book-keeping originated in Boston about 1852, and as 
may be supposed, was the invention of a man whose prime idea in the 
matter was to save himself work. 

A Mr. Lane, who was the Book-keeper of the old Cochituate Bank, 
got tired of writing the dealers' names over and over every day, and 
prepared a form with a wider page, whereby he only had to write them 
once in three days. With the natural pride of an inventor, he showed 
his draft of the new form to the Teller, Mr. J. W. Bailey, afterwards 
with the Bank of North America, who thought it a good idea, and 
suggested the improvement of putting a daily balance column between 
the rulings of the several days, and thus doing away with the "Bal- 
ance Book." 

Of course Mr. Lane accepted this important improvement. He 
revised his sketch, ordered his new book, and when he found how well 
it worked undoubtedly discarded his old ledger as others have done 
since. 

With experience the form has been, in some cases, changed a little, 



58 PRACTICAL BANKING. 

but the old books of the Cochituate Bank, still stored away, show the 
main idea to have been put in use at that time. 

Possibly the failure of the Cochituate Bank may have had some 
influence in the matter, but whatever the reason may have been the 
system did not get into use in many banks during the first twenty 
years. 

After that time, and while Mr. Charles 0. Billings, now President 
of the Globe National Bank, of Boston, held the office of National 
Bank Examiner, largely, in fact, through his interest and advice, the 
Boston banks one after another adopted it, and it has rapidly extended 
to other points as its usefulness has become known. 

A form of the Skeleton Ledger correctly ruled and printed is shown 
in the appendix in the back part of this volume. It is necessarily 
contracted in depth and does not show the book in full. 

The full-sized leaf is 24 inches in length by 19 inches in width, and 
the book when opened takes a space upon the desk of about 40 inches 
in width. 

The left-hand page begins with Monday, and the work of six days is 
on the open book — three days on the left-hand page and three on the 
right. The book accommodates about fifty accounts to the page, and 
the original line on which the account begins (the names being printed 
in the margin) is followed through to the end of the book. Quiet 
accounts — that is, accounts drawing but few checks — are placed 
between the more active ones, and spaces are left between the letters 
of the alphabet for new accounts to be written in as they are opened, 
more space being allowed for the active letters like B, C, H, M, R, S, 
and W, than for the others. 

If a bank has three hundred accounts it would be best to use eight 
forms, placing bank accounts after the individual accounts, to be 
followed by the impersonal accounts. 

After the book has been arranged for the business of the bank the 
balances of the respective accounts are placed in the balance column 
to the left of the day on which it is proposed to start the work, all the 
credit balances in black ink and all debit balances in red ink, Cash 
being treated as an account and entered in red ink. The footings of 
the two inks should agree, as they make up the trial balance. When 
this is done we are ready to begin the day's work. 

The checks which are paid through the Clearing-House are entered 
in red or blue ink, to distinguish them from checks paid over the counter, 
in the two columns marked " Checks in Detail, " and added up, thus 
furnishing the Teller's proof of the Clearing-House settlement. All 
checks paid over the counter during the day are entered to the respec- 
tive accounts in black ink. At the close of the day's business all the 
short entries are carried into the columns — "Total checks" and "Total 
Credits " — the footings if the work is correctly done, agreeing with the 
work of the Tellers. The balances are carried forward, proved, and 



THE BOOK-KEEPER'S DESK. 59 

the book is ready for the next day's work which goes forward from 
that time. 

To the enthusiast in blank-books these large books with their many 
rulings of various colors are a ' ' thing of beauty, " and the Book-keeper 
with a taste for design and color can arrange his ruling so as to be 
pleasing to the eye as well as distinct and clear for the daily entries. 

It adds to the certainty of correctly following an account across 
the wide page to have the cross-rulings, that is, the horizontal lines, 
varied in color. I have seen books with red, blue, and black lines one 
after the other all down the page, but it is not necessary to go to such 
an extreme. If every third line is made red or black among the usual 
blue lines it will be found quite enough. 

It is usually more convenient to make the book of a size to accom- 
modate six months' business, and for economy two books, or a year's 
supply, may be prepared at a time. 

An old Book-keeper taking up this style of keeping his accounts 
may, as he finds his books filling up and being succeeded by new ones, 
object that he cannot readily look far enough back in his accounts and 
that matters on which inquiry may be made are too soon inaccessible 
or not easily found. For this reason and to supply information on some 
other points, banks using this style of book have at times felt the need 
of some sort of an index. Accounts pass into it and out of it, as in the 
rapidly passing months and years new accounts are taken on and 
dropped out ; and, in the absence of an index, it is a difficult thing to 
trace the history of the rise and fall of any of them. These skeleton 
ledgers are very large books, for they are built to do a deal of work ; 
yet they are soon gone through with — filled up — and, when full, are, 
of necessity, consigned to an unindexed grave in the archives of the 
bank. 

An ingenious bank officer of New York has copyrighted a plan for 
permanently indexing these central record books; and, where his idea 
is adopted, the bank manager can have on his desk a book of moderate 
size, in which is to be found a key to his present and past list of 
depositors — a digest showing concisely when they opened accounts with 
the bank, when they may have closed them, what sort of accounts they 
were, and how the bank treated them in the matter of interest upon 
their deposits, accommodations extended to them, etc. , etc. 

Such a book will surely pay for the labor put into it when the 
sudden call comes for the information which it supplies. In some 
banks it might be advisable or more satisfactory to keep only the 
individual accounts on the Boston plan, and have an ordinary ledger 
for the other accounts. Here is a neat form of journal furnished me 
from an interior bank, from which the amounts would be posted to 
the ledger accounts. 

Each of the forms on page 60 (Form 6, left and right-hand pages) 
shows a page, in brief, with transactions entered : 



60 

Journal. 
Cash, Dr. 



PRACTICAL BANKING. 
Thursday, July 24, 1890. 



Bills Discounted. Brown 

Jones 

National currency issued, 10, 10, 10, 20. 
Deposit account 

Mercantile National Bankt 

National Bank oi Redemption + 

Profit and loss. Exchange 

Chemical National Bank. Lawson . . . 

First National, Hartford. Smith 

First National, Meriden. Letter 

First National, Norwich. " 

Bank account 

Cash, Dr 



1,000 
2,000 



500 
1,000 
2,000 
1,000 



3,000 

4,000 
30,000 

9,000 

3,000 

10 



4,500 



53,510 



Journal. 
Cash, Cr. 



Form 6— left-hand page. 
Thursday, July 24, 1890. 



Certificates of deposit 

Mercantile National Bank + 

National Bank of Redemption + 

Deposit account 

First National, Hartford. T. Brown 

First National, Meriden. T. Jones 

First National, Stamford. N. Mead, 1 Nat. 

F. Collins, " 

First National, Norwich. J. Peters, " 

S. Martin, " 

Bank account 

Cash, Cr 



( 100 
< 100 
{ 50 




* 




*250 
11,000 

6,000 
20,000 




1C0 




1,000 
2,000 








100 




200 








100 


400 




500 




3,700 






40,950 



Form 6— right-hand page. 

* The two columns marked with a star are ruled perpendicularly with five fine 
lines, dividing them into small squares, one for each figure. In large Journals this 
is a good form, as it tends to prevent errors in footing by keeping the figures in a 
direct line with each other. 

+ We keep a separate book for our reserve agents, and transfer the footing to 
Journal. The Mercantile National Bank and National Bank of Redemption, entered 
in above form, are reserve agents. 

The charges of Brown and Jones are notes due to-day, and are to be found on the 
Ticklev. 

The other charges are checks sent away for collection. 

Under this method of making a full record of the checks sent away, on the books, 

a copy of the letter is not necessary. Those who prefer to keep a copy of letter can 

make full record of checks in letter, and charge it in the Journal in one item, as 

follows : 

| | First National, Norwich. Letter j | II 500 I II | | 

Our Deposit Ledger is a ledger and balance sheet combined. We enter deposits 
and checks direct, and enter footings in Journal as above. 

Everything is an original entry in our system of keeping the books, thus keeping 
the chances of errors at a minimum, and saving much labor. 



THE BOOK-KEEPER'S DESK. 61 

THE CONDITION OF THE BANK. 

Under this, or some similar title, every bank which has its full com- 
plement of books will show its General Balance Sheet giving at a 
glance the exact condition of the institution. 

Here, in a few condensed figures, are presented in a wholesale style 
the assets and liabilities of the bank, all of which can be, if the bank's 
book-keeping is what it should be, verified and fully explained in detail 
by reference to the various other books. 

Some banks make it up twice a week — on days of Directors' meetings ; 
in others, every day ; and, in active banks, with large and complicated 
business, it is desirable that its daily preparation should be required. 

Cashier, President, Directors — every body engaged in the work of 
running the bank, should every morning have before them this concise 
statement, showing the source from whence came every dollar the bank 
is managing, and also where every one of those dollars has been scattered. 

"With this before him the active Manager of the bank, be he Presi- 
dent or Cashier, sees at a glance the result of the business right up to 
date, and by examination of his loan balance can judge whether he can 
prudently still further increase his loan or whether he has already taken 
on all the time paper he can safely carry with his present supply of 
funds. Thus armed he is ready to negotiate with borrowers intelligently. 

He may also note just how the Expense and Exchange accounts are 
running, whether any apparent leaks or carelessness there need looking 
after ; may see too, the Teller's report of cash and can observe whether 
the bank is getting loaded with unusable funds or whether on the 
contrary the Teller is getting pinched for currency. 

The income accounts are also under his eye, the credit balances of 
Discount, and Interest, and he notes whether they show a good prospect 
for the next dividend or whether he must push yet a little harder to 
make sure of not coming short of the amount he wants to see there 
when the six months' period ends, and the bank must balance oil its 
income and outgo and show a result that will please the stockholders. 

Lastly, I will mention our Manager's scrutiny of the balances due 
to and from correspondent banks, and these are of great importance 
and require daily attention ; for they are often in large figures and some 
transaction in every day is quite likely to hinge upon their condition 
and the questions of whether the bank is liable to be suddenly drawn 
upon heavily by a distant correspondent, or whether it has on the other 
side large idle balances at other points which should be more profitably 
employed. 

The form I here present is a most practical and desirable one, and 
is one that can, without many changes, be applied to any bank. (See 
Form 7, page 62.) 

The statement tells its own story quite clearly — at any rate so clearly 
that any junior bank officer who studies it carefully in connection with 
the various explanations of the methods and machinery of the other 



PRACTICAL BANKING. 



departments of a large bank which are given by me in this volume, 

may understand every item of it. 

Dr. Condition of the Bank, May lUth, 1890. Cb. 



Bills and notes 


I 




$3,509,111 

26,505 
8,855 

269 
48,000 

684,921 
416,023 


61 

11 

13 

79 

92 
56 


Capital 


$74,637 
11,071 


05 
56 

76 

66 

13 

74 


$1,000,000 
400,000 

46,468 
529,980 

1,643 
1,060 

1,325 

9,000 

85,708 

287,224 
2,331,276 


59 
25 

61 

29 

82 
56 


discounted 

U. S. Bonds with 
Treasurer U. S 


$2,930,111 
589,000 


61 

14 
65 

89 
02 
71 

72 

05 
53 


Surplus fund.... 

Profit and loss 
account 

National bank 
notes issued 
(this bank) 

Sundry divid'ds. 
Dividend No. 38. 
Expense acct.... 
U. S. tax acct.. . . 
Shareh'ld'rs' tax 
account 

Discou't on bills 

and notes 

Interest acct.... 
Exchange acct .. 

Due to other 

BANKS 


U.S. Treasurer.. 

Comp. Currency 
red'n account.. 

5 % fund with 
Treasurer U.S. 

Expense acct.... 
U. S. tax acct — 
Uncol. interest.. 
Exchange acct... 
Premium acct. . . 

Balance of 

Cash, viz.: 
Gold cert. $45,000 
Gold Coin 79,578 


124,578 
76,122 

178,200 

3,560 

29,262 
273,199 


Silv., Nickels, &c. 
U. S. legaj-tend'r 


Nat'l bank notes 
(this bank) 

Notes of other 
banks 


Checks, &c 


202,389 

7,577 

4,393 
1,579 

71,284 


Due from oth- 
er banks : 


129,641 

210,931 

2,457 

2,948 

7,471 
62,573 


Tenth National 

Bank, N.Y.... 
Eleventh Nat'l 

Bank, N. Y 
Farmers' Nat'l 

Bank, Phila ... 
Fourth Nat'l Bk. 

Portland, Me . . 
Fifth Nat'l Bk, 

Providence 


Twelfth Nation'l 

Bank, N. Y.... 
Farmers' Nat'l 

Bank,Balto 

Pacific Bank, 

San Francisco.. 
Sundry places. . . 
Fourteenth Nat. 

Bank, N. Y 

D u e t o depos- 
itors 


Sundry places... 














$4,693,686 


$4,693,686 



Form 7. 



THE BOOK-KEEPER'S DESK. 



63 



To illustrate more fully — here is another form of a General Balance 
Book. This is from a bank outside of the reserve cities. (See Form 8 
below and the itemized explanation following it.) 



1890. 



United States Treasurer (Government Bonds).... 

United States Treasurer (Reserve) 

Bides Discounted 

Bills Receivable 

Mercantile Nat'l Bank, New York (Reserve) 

National Park Bank, New York (Reserve) 

Hanover Nat'l Bank, New York (Reserve) 

National Bank of Redemption, Boston (Reserve) 

Expense Account 

Cash Account 

Bond Account 

Suspense Account 



Capital Stock 

Surplus Fund , 

National Currency Issued. 

Profit and Loss 

Undivided Profit 

Certificates of Deposit 

United States Tax 

Dividends Unpaid 

Non-Resident Tax 

Foreign Banks (Balance) 

Deposit Account 



Dr. January 28. Cr. 



$300,000 
13,500 
647,816 



79,611 
44,256 
25,992 
6,092 



56,187 
19,000 



$1,192,451 



34 



$300,000 

150,000 

270,000 

3,048 

16,034 

11,521 

1,327 

620 

37,491 
402,414 



$1,192,45; 



34 



Form 8. 

A clear explanation of the itemized accounts included in this 
General Balance Sheet is also given in the following paragraphs under 
the headings ' ' Assets " and ' ' Liabilities " : 

Assets. 
United States Treasurer (Government Bonds) $300,000.00 

The bonds are held by the United States Treasurer as security for $270,000 of cir- 
culating notes. 
United States Treasurer (Reserve) $13,500.00 

This amount is 5 per cent, of the amount of circulation, and is held by the Treas- 
urer for the redemption of worn and mutilated circulation of this bank. 
Bills Discounted $647,816.36 

This is composed of commercial paper and other notes, with bonds, stocks etc., as 
security, discounted by the bank. 
Bills Receivable 

This account is sometimes charged with long-time paper received in settlement 
of notes previously held, and which were not paid at maturity in consequence of 
failures, assignments, etc. 

Mercantile National Bank, New York (Reserve) $79,611.87 

National Park Bank, New York (Reserve) $44,256.60 

Hanover National Bank, New York (Reserve) $25,992.85 

National Bank of Redemption, Boston (Reserve) $6,092.55 

These banks are all reserve agents approved by the Comptroller of the Currency. 
The total amount on deposit with reserve agents, except such portion as is legally 
necessary for reserve, is drawn against for the daily requirements of business. 
Expense Account 

To this account is charged payments for salaries, rents, etc. It was closed De- 
cember 31, 1889, no entries having been made since that date. 



64 PRACTICAL BANKING. 

Cash Account $56,187.11 

Is cash on hand in the bank, and includes the lawful money reserve. 
Bond Account $19,000.00 

Represents investments of the bank in bonds of railroad companies, etc. 
Suspense Account 

This account represents such items as are in doubt, but which will probably be 
paid in time, such as past-due commercial paper, etc. 

Liabilities. 
Capital Stock $300,000.00 

Represents the amount actually paid in by the stockholders, and is an obligation 
of the bank to them. 
Surplus Fund $150,000.00 

Represents the profits of the bank over and above those needed for expenses and 
dividends, credited up to this account from time to time since the organization of the 
bank, and is an amount in which the stockholders would participate if the bank was 
wound up, or in part if the Directors should vote to pay a portion of it in the form of 
a dividend. 
National Currency Issued $270,000.00 

Represents the amount of circulating notes received from the Comptroller of the 
Currency aud issued by the bank, the same being 90 per cent, of the amount of United 
States bonds on deposit with the United States Treasurer as security for the same, 90 
per cent, of the amount of bonds being all the currency allowed by law. 
Profit and Loss $3,048.81 

Represents the amount of earnings from discount of commercial paper and notes 
secured by collaterals, profits on items collected, and exchange received on drafts 
issued against deposits with reserve agents (New York or Boston) since December 31, 
1889, when the accounts of the preceding six months were closed, and when balance 
to the credit of profit and loss account was transferred to Undivided Profits. 
Undivided Profits $16,034.48 

Represents profits, carried from Profit and Loss account, in excess of what was 
required for losses, expenses and dividend of January 1, 1890. It is practically the 
same as Surplus Fund, and, if added, would make that amount $166,034.48. 
Certificates of Deposit $11,521.05 

Represents certificates issued by the bank for money deposited. They are issued 
generally to those who keep no regular bank account, and who temporarily deposit 
funds for which they have no immediate use. 
United States Tax $1,327.28 

Represents the amount of United States tax on circulation for the six months 
preceding January 1, 1890, and not yet paid over to the Government. 
Dividends Unpaid $620.00 

Is amount of last dividend which is still uncalled for by the stockholders. 
Non-Resident Tax 

To this account is charged the amount paid to the Town Treasurer for tax on the 
shares for stockholders who reside out of the State. 
Foreign Banks (Balance) $37,491.23 

This is the amount due to banks out of the city for whom the bank has made 
collections in excess of amoant due from banks that make collections for it. 
Deposit Account $402,414.49 

Is the amount due to depositors having accounts with the bank. 

All these books as well as the smaller blank and memorandum books 
of the bank, and the check books also, should be made in the neatest 
style and of the most approved forms. It costs but a trifle more to 
have these things prepared on excellent paper, with good binding and 
printing, than it does to get them up in a slovenly manner. Good 
methods and neatness of manufacture in these properties of banking 
reflect credit upon the management of the institution and the working 
habits of its officers. Each department through its proper officer 
should see to it that the special blank books regularly in use are not 



THE BOOK-KEEPER'S DESK. 65 

allowed to run down too low in stock — that time enough is allowed the 
stationers of the bank to properly manufacture and season them. 

An excellent manner of covering this latter point is for the officer 
using check and other blank books to make a memorandum on the last 
blank page of the last book he has on hand in stock to the effect that 
it is the last one on hand, which memorandum when he comes to use 
that book, will serve as a reminder that others must be ordered of his 
stationer. 

ASSORTING AND CARE OF CANCELLED CHECKS. 

The paid and charged checks and vouchers are properly in the care 
of the Book-keeper so long as the bank retains them and should be 
kept nicely assorted and ready for reference at a moment's notice. 

There is no work in the bank which ought to be done with more 
system and care than this work of assorting cancelled checks; for 
mistakes in assorting cause great annoyance and may lead to worse 
troubles. 

If tlje Book-keeper does not himself assort his checks, work of 
this description should be put into the hands of clerks who understand 
well the names and styles of the various checks which are regularly 
drawn upon the bank, and who are skillful and systematic in their 
ways of work. 

I have been shown a very good application to the drawer in which 
banks assort their paid checks. Pieces of thick card-board are, in this 
plan, cut a little longer than any checks are likely to measure ; and, on 
the top of each end of these boards, the name of a bank depositor is 
written or printed. 

Here is a form of this simple little contrivance, and I give it here 
because I believe those bankers who haven't it already will at once 
want to adopt it : 



W. E. JONES. 



The use and advantages of these paste-boards must be readily seen. 
They are placed as dividing lines in the check-drawers, between each 
customer's checks, and the names on the wider end of the board by 
showing clearly where the various checks are, have enabled the sorter 
to easily classify them, and will enable the Book-keepers or other clerks 
to readily find them. 

In another check-drawer arrangement, which I have known and 
which certainly has the merit of wearing well for it has been in use for 
years, the division strips are made of little pieces of hard-wood board, 
with the names of the various depositors affixed to the upper edge of 
the board by the use of printed stickers. The difficulty with this plan 



66 PRACTICAL BANKING. 

was that the drawer was made very heavy by the weight of the necessa- 
rily rather thick division boards. 

REPORTS AND RETURNS. 

If the Book-keeper does not himself make up the various returns 
which are called for, both under the National Bank Act and, in the 
case of State banks by their State laws, he must furnish the figures 
which are needed to make them and should understand the forms 
on which they are made up. 

It is my opinion that it would be a very excellent plan for every 
officer employed in a National bank to learn how to make out all 
its returns. 

There are few better ways in which to learn how the machine 
runs — to acquire a complete knowledge of the philosophy of banking, 
and an intimate acquaintance with its methods and machinery — than 
this of studying how to make out these returns. 

An able young bank President, who was new to the methods of 
National banking, but not new to the subject of finance, in entering, 
not long ago, upon his new duties, took the needful blanks and the 
books of his bank, and ciphered, and wrote, and studied, till he was 
able to make out from original sources all these complicated returns, 
without the aid of any of his subordinates. A President disciplining 
himself in such a way as this is on the road to success as a chief 
executive. 

Beside the returns or statements of condition which are mainly a 
copy of the General Balance-Sheet of the bank there are reports to 
be made to the Clearing-House — when located where a Clearing-House 
exists — and reports which are a basis for taxation, or for official 
statistics. 

Of this nature is the Return of Circulation. 

In order to enable the United States Treasurer to assess the duty 
upon circulation, which is one-half of 1 per cent, every half-year upon 
the average amount of each bank's notes in circulation, the Cashier of 
a National bank must, within ten days from the first of January and 
July of each year, make a return under oath to the Treasurer of 
the United States of this required circulation average. A bank not 
promptly making this return is liable to a penalty of $200. But it 
is not probable that the Government would enforce this penalty for 
any slight accidental delay. It was put into the Bank Act for the 
purpose of punishing wilful neglect. This circulation return is made 
up in the usual manner of obtaining an average by adding the different 
amounts which the bank has recorded each day as the amount of 
outstanding circulation and dividing this sum by the number of days 
in the six months. 

The Bank Act formerly required the banks to make a semi-annual 
return to the United States Treasurer of the average amount of capital, 
beyond that invested in the United States bonds, average amount of 



THE BOOK-KEEPER'S DESK. 



6? 



deposits and average of circulation. This was when the banks were 
under a tax upon these three items, which they have now been relieved 
of with the exception of that upon circulation. The old law demanding 
these three returns has not actually been repealed, but it has become a 
dead letter because the object for which it was enacted has passed away. 

The President or the Cashier must make oath to all these returns 
to the Treasurer or the Comptroller and this is an added reason for 
their being carefully prepared. 

In order to be always ready to do this work in the most correct 
and prompt manner, a book arranged to give quick and clear service 
in the work of making up all these statements is a valuable aid to 
the Book-keeper. 

I here give a very concise and handy form (see Form 9) of a book 
specially devoted to the work of preparation for making out these 
returns, which under the best system is written up daily and which, 
with some few variations, such as will readily suggest themselves to 
any Book-keeper or Cashier, can be adapted to the wants of any bank, 
large or small, in city or country : 



1 23456 7 8 9 10 




1 


•3 

o 

% 


1 

8 


J 

r 


Due from Banks and 
Bankers, including 
bills of other Na- 
tional Banks. 


i 


"S3 

J 

ll 


8 

§ 
i* 

e 

o 


u 


1 
II 


1 

o 

3 

H 


$3,700,700 
ave 31 lin 


$77,200 
es deei 


$54,100 
3, one 


$119,600 

for eact 


$25,000 
264,300 

i day. 


$235,200 


$1,057,900 
3,700 


$510,600 


$1,061,600 


$250,800 
26,500 



Form 9. 

I consider this book an absolutely indispensable one, though I find 
many banks manage to stumble along without it — as, in fact, they 
do without many other bank books, which I deem necessary to the 
proper administration of the internal economy of a bank. 

This book should be neatly and strongly bound up in quarto form, 
and the printing in it should be of a clear and well-arranged character. 
Have the book made thick enough to last some years; and, when 
obtained, see that the needed entries are made in it every day. 

It will prove a great satisfaction to bank Managers, etc., to see 
this book promptly written up to date; and, thus kept, it will be a 
source of satisfaction as well as of valuable information. 

The figures on the left are those of the days of the month, and it 
should also have, for convenient reference, a similar column on the 



68 PRACTICAL BACKING. 

right. The figures at the head of the columns I have placed there 
for the purpose of indexing my explanations. 

(1.) Represents the entire loan of the bank — its investments in 
notes, bonds, etc., etc. 

(2.) The gold and silver it is carrying. 

(3.) Its legal-tenders on hand. 

(4. ) Its balances in New York banks which are its reserve agents. 

(5.) Amounts due from other banks and bankers, other than its 
reserve agents, and the bills it holds of other National banks. These, 
under Government rulings, count in carrying reserves, as money due 
from other banks. 

(6.) All amounts due banks and bankers. 

(7.) Deposits and dividends declared, but unpaid. Under depart- 
ment rulings, dividends unpaid must be counted in figuring reserves on 
deposits. 

(8.) The entire amount of the bank's circulation outstanding — those 
bills on hand, either unsigned or in the Teller's cash, having been 
deducted. 

(9.) Net deposits upon which reserve must be held. 

(10.) The actual amount of reserve the bank is holding, all around, 
including, of course, its 5 per cent, fund in Washington. 

From a book thus kept, Managers can, at a glance, see how their 
banks are running, the Clearing-House returns can be most speedily 
made up, and also the semi-annual circulation tax returns ; and, at the 
same time, it is a valuable aid in the work of making up Comptroller's 
returns. 

I must hint in this connection that it is exceedingly desirable that 
all bank returns should be made in the promptest manner, and bank 
managers should see to it that the requirements of the law in this 
regard are promptly lived up to. As it is now, there are banks which 
are slow in forwarding these statements, when called upon by the 
Comptroller, and slow in getting the abstracts into the papers after 
the returns have been made. 

The mention of the papers reminds me of a point which is of interest 
and that is that these bank returns as they are made to the Comptroller 
of the Currency, and published in abstracts in the newspapers, are of 
precious little value to the investor who is searching for solid informa- 
tion relative to the condition of this and that bank, whose shares he is 
thinking of buying. 

It is well that these bald and dry returns should be printed, since 
nothing better, in their way, so far, has been devised, but they leave 
much still untold and uncertain regarding the condition of the bank. 

The key to the situation of a bank is the real condition of its loan. 

The loan figures are the great and all-absorbing figures of these 
statements. And it is because these statements make no attempt to 
give any real inside view of the merits and demerits of the living loan, 



THE BOOK-KEEPER'S DESK. 



that they convey so little valuable information. I can hardly see how 
we are to expect anything more. No bank wishes to advertise its 
weakness. And, if a bank is in a bad way, it will be the last institution 
to do this. Some of the most cheerful bank exhibits have been made 
the day before the bank making them has given up the ghost. 

Our National bank returns are not the only ones which get into the 
papers, for this public showing is considered a good thing the banking 
world over. 

And there is not much unlikeness in the form of returns even from 
opposite sides of the globe. Here are a couple of ' ' foreigners " : 

First, a Spanish bank return of to-day (see Form 10) ; yet, there it is 
again — a big loan, about which we are told nothing — can know nothing. 



Assets. 


Liabilities. 


| 
Pesetas. Pesetas. 

Cash 55,553,623.70) 

Bullion (gold V60,432,167.93 

and silver).. 4,878,544.23' 
Cash at branches and ag-'c's 94,520,246.74 

Securities at Madrid 585,160,637 . 13 

Seouritiesheld at branches 108,653,044.43 
Landed and other property 7,319,771 . 78 
! Amount to the credit of 
the Treasury for pay- 
ment of interest and re- 
demption of "billetes 
hipotecarios" and obli- 
gations of the Bank and 

Treasury 

Redeemable debt, at 4 per 

cent 12,222,075.00 

National Treasury— acct. 
of interest on perpetual 
debt, 4 per cent 3,761,212 . 18 


Pesetas. 

Capital 150,000,000.00 

Reserve fund 15,000,000.00 


Notes in circ'n at Madrid ) 

_ T , . , __ , i f 349,U53,475 . UU 

Notes in circ n at br nches > 

Deposits in cash at Madrid 
and branches 36,360,758 . 15 

Accounts current at Ma- 
drid and branches 159,369,656.43 

Dividends 2,246,049.91 

Profit and loss account. ... 17,846,087. 73 

Sundries 66,388,681.62 

Nation'l Treasury— results 
of red'mable debt's issue 43,088,809.40 

Stock to be changed in re- 
deemable debt, at 4 % ... . 13,271,252 . 50 

Credit on abroad by agree- 
ment of 28th May, 1883 . . 19,444,444 . 45 


Total 872,069,215.19 


Total 872,069,215.19 



Form 10. 

Then another — a return of the condition of the Bank of Moscow — 
<see Form 11) which I obtained in London, and to which I call attention 
for the purpose of showing that the drift of the banks of this country 
towards a habit of paying interest upon deposits is nothing new in 
hanking — that it is everywhere in Europe a common thing with 
stock banks. 

This practice, which I personally observed in London, extends from 
London to Moscow. 

The rouble of Russia — the standard rouble, which is the silver one 
— is of 75 cents value. The capital of the bank of this statement is 
therefore three million dollars. 

But the statement shows that it indulges quite extensively in the 
luxury of hiring deposits, and does, as a result, a large business on its 
<3omparatively moderate capital— a business whose extent is clearly 
shown in the loan figures. 

A curious item in this return is that of protested bills, which amount 



70 



PRACTICAL BANKING. 



to about $75,000, showing the bank has been passing through some very- 
hard days. 



MOSCOW DISCOUNT BANK, MOSCOW. 



Assets. 


Roubles. ^ 


Liabilities. 


Roubles. 8* 


Cash in hand 


633,341 84 

1,070,420 47 

10,000 00 

9,732 42 

6,911,264 93 
5,729,394 20 

1,469,117 30 
310,117 66 

104,102 35 

139,922 92 

6,734 50 

347,138 97 


Capital paid up 


4,000,000 00 


Cash at bankers 


Reserve fund 


647,971 78 


Treasury bonds at short dates 


Deposits : 

(a) In current ac- 
counts 6,032,747 48 

(b) At call and 

short notice. 130,587 42 

(c) For fixed pe- 

riods 3,298,637 53 


Bills discounted : 

(a) Billswith sev- 

eral endorse- 
ments 6,287,864 93 

(b) Bills with one 


9,461,972 43 




signature 
against addi- 
tional secur- 
ity in stocks 
and shares.. 623,400 00 


Bills rediscounted 


1,014,506 78 

500 00 
658,529 44 


Special account with State 

Bank against bill depot. . 

Foreign account 


Advances on securities 

Government and other stock 


Unclaimed account 

Interest on deposits 


14,123 50 
80,207 97 


Interest, commission, etc., 

for 1884 

Sundry creditors 




Foreign bills 


811,225 01 


Protested bills : 

(a) Billswith sev- 
eral endorse- 
ments 44,103 35 

Ob) Bills with one 
signature 
against addi- 
tional secur- 
ity in stocks 
and shares. . 60,000 00 


41,350 65 






Mercantile expenses to date. 

Furniture and fixtures 

Sundry debtors 










16,730,287 56 , 


16,730,287 5$ 



Form 11. 

The English bank returns are made after the same general form as 
those of the National banks of this country ; or, it might be more proper 
to say that our returns, like very many business ideas, are copied after 
the English. There was a time when the Bank of England, which now 
publishes a weekly statement of its condition, made no public showing 
of any description whatever, and would not even do so when called 
upon for such by the Government and Parliament. The English 
authorities are now exceedingly strict in requiring that returns of the 
banks shall be made in regular form and at the right time. All limited 
English banks are required to post in their registered offices on the 
first Monday of February in each year a complete statement of their 
liabilities and assets. An instance occurred of recent date where a 
London bank was arrested, as it were, and dragged into the Municipal 
Court at Westminster for violating this return law (Act of 1862), and 
though the bank proved that it had posted in all its offices at the date 
required balance sheets giving more than the information demanded 
by law, but not in regular form, it was fined £5, and each Director 



THE BOOK-KEEPER'S DESK. 71 

fined 40 shillings, one-half the penalties going to the informer, who in 
this case happened to be a man who was endeavoring to levy black-mail 
upon the bank, professing to have information of value which he would 
sell to them for £1,000. 

I found also that they had a similar law in force for the savings 
banks and every bank of this sort was, by law, obliged to post in its 
rooms, as often as once a week, a statement of its condition — a regular 
trial balance of the concern — which was placed where the public could 
read and study it. 

In some quarters in this country, it is the custom of savings banks 
to post statements after the English custom, and it might possibly be 
well to have in force a law requiring such action on the part of all 
savings institutions. 

It might also be well to have statutes requiring savings banks to 
make returns to the press of abstracts of their condition after the 
National bank style. 



72 PRACTICAL BANKING. 



CHAPTER V. 

THE COLLECTION DEPARTMENT AND MESSENGER. 

The officer at the head of this department is naturally termed the 
Collection Clerk and takes charge of the paper which the bank receives 
for collection for account of its depositors, and in some banks will have 
delivered to him for collection the ' ' foreign " discount notes also. The 
duties of the position demand a man with a clear head, a good capacity 
for reckoning and writing, and, withal, a man of pleasant address and 
good judgment ; for, in the discharge of his work, he is brought in 
direct contact with the bank's dealers and the general public. There 
are few positions in a bank more desirable for the young man who 
wishes to learn banking. Here he will find the best of opportunities 
for perfecting himself in a knowledge of all the laws and customs rela- 
tive to promissory notes and bills of exchange — all the rights and 
duties of parties to such papers. 

In order to safely get through the work of his department, it seems 
almost imperative that he should inform himself thoroughly on all the 
points last named ; and, in order to do this, he will be naturally led 
from the study and practice before him to a careful examination of the 
books which are specially devoted to giving information relative to 
notes and bills ; and, to keep posted up to date, he should read regu- 
larly a live periodical which deals with practical banking subjects. 

His material, the grist which he is to work through, comes to him 
generally carefully invoiced by the bank's correspondents and its 
depositors. That is, it should be carefully invoiced, but sometimes 
loose practices prevail among banks and depositors relative to this 
item of the banking business. The dealer, who is very sure to bring 
his pass-book with him when he comes to the bank to make a deposit, 
and who is never satisfied unless his deposit is at once duly entered to 
his credit on this pass-book by the Receiving-Teller, as it should be, 
will at the same time fall into the habit of flinging his collections into 
his bank without accompanying them with vouchers, letters or memo- 
randa of any sort. 

The only proper way for him to do his collection-depositing business 
is to send his maturing paper to the bank in a formally-written letter, 
of which he has retained a copy, and it is well for the bank to give 
him formal acknowledgements of these letters, stating that they were 
received with enclosures as described. 

In cases where a careless way of leaving collections is practised 



THE COLLECTION DEPARTMENT AND MESSENGER. 



73 



complications may in time arise. The collection paper, which might 
have been left unlisted and unacknowledged at the bank, may be lost 
or mislaid. When thus failing to appear the bank will be confident it 
was never left with it at all, while the depositor is equally sure that he 
deposited it. What if the paper never turns up to settle the dispute? 

Another point which should be covered when the paper is taken on 
is the question of whether, if not paid at maturity, it shall be protested. 

Quite possibly the owner would not care to have the piece saddled 
with protest fees which may have to come from his own pocket, but 
unless he has guarded against this contingency by "no protest " instruc- 
tions when he deposited the paper, the bank has no discretion and to 
the notary it goes to the dissatisfaction of all parties — except the latter. 

But we may imagine that the notes and drafts have come into his 
hands with proper description and instructions from their owners, 
that he has receipted on the letters for the items which he has taken 
and is ready to make the records which ensure a safe management of his 
department and a correct disposition of the proceeds of his collections. 

His first record is of those drafts which are to be taken out by the 
Messenger and presented for acceptance or payment. This is a simple 
matter, the record being brief, but including always a memorandum 
of the owner of the paper so that it can be properly credited when the 
Messenger returns with the funds representing paid and delivered drafts. 

Those pieces which are not to go into the hands of the Messenger, 
because not yet due, or which the Messenger brings back from his trip 
accepted ard due in the future, will be covered. 

Given below are two specimens of note-covering. (See Form 12.) 



(J 


fflo few. 


Sffec&aw^cJ <y<7&*z4v 


T/ 






<7 




(^dtr'A 






xJ- 



^^tccc</ 






Form 12. 

The above note-covers (5 and 7) are of a sort which I have seen 



74 



PKACTICAI. BAI^KIXG. 



in use in a large bank, and which I here give as specimens of covers 
that are not well arranged, since on them the points most important 
are set down in the least prominent place. 

The forms below comprise the best I have found in use in banks : 



NEW YORK 

&co. /? yp /pT7) 



#4/ 



//<^060. 




i&ttef 



4> 



J^uy<J/ 9o 







4} 




^Worcester, Ms. 
"/O.OOO. 




4> 






'?o 





Qf O<x-,s/ 9o 


4> 



Form 13. 
(1.) A cover of an acceptance due out of town. (2.) Cover of a note due out of 
town. (3.) Cover of a note due in place where the bank is located. (4.) Cover of an 
acceptance of same character. 



THE COLLECTION DEPARTMENT AND MESSENGER. 



75 




sions of the collection business of the 



On each of these covers 
there are found : first, the time 
and place of maturity; next, 
the name of the promisor or 
acceptor, with the date, time 
and amount of the paper im- 
mediately under; and, below 
all, the names of the owners 
of the paper. 

On covers of the paper pay- 
able out of town all the names 
upon the paper had better be 
recorded. 

The first and most important 
duties coming up in covering a 
note are to get the time and 
place of payment rightly noted. 
Mistakes here are the mistakes 
that are very often leading 
banks into serious trouble. 

Some banks do not use 
covers but keep the collection 
paper in large pocket-books in 
the manner I describe in the 
chapter on discounting. 

Whether covered or not 
they must be entered on a Col- 
lection Record which is the 
main book of the department. 
Here they are entered in the 
order of their maturities. I 
know of no better form for 
this book than this (See Form 
14) which is a copy of one long^ 
in use in a bank doing a very- 
heavy collection business. 

It is an excellent plan to 
record the notes direct from 
their face, since an after-com- 
parison with the covers will 
then prove a safeguard. 

The space to be left on the 
record book for the coming 
months and days is to be gaug- 
ed, of course, by the dimen- 
bank. Some banks may not 



76 PRACTICAL BANKING. 

have more than one or two collection notes due a day. I have known 
a bank to have 1,200 maturing in one day, 80 of which were given to 
the notary to protest. 

As the paper matures and is brought out for payment a systematic 
Collection Clerk will promptly see that every one of his covers is 
received back from the Receiving - Teller (or Note - Teller) and dis- 
charged from this record book ; and he cannot properly discharge 
these covers until he has seen by the entries upon the credit books of 
the bank that those which are reported paid have been duly credited 
to their owners. 

The utmost care should be taken that no cover gets treated as dis- 
charged and settled and finally filed away with an unpaid note inside 
it. It is hard to imagine a more troublesome mistake than that might 
prove to be. 

Several forms of notices are included in the stationery belonging to 
this department and the manner of attention to such minor points as 
these often clearly shows the character and style of the administration 
of the affairs of a bank. 

In the first place, they should be neatly and tastefully printed, on 
good paper of the right shape and size, and should be clearly and cor- 
rectly expressed. 

I here give some very good forms (See Forms 15 and 16) in actual 
use by one of our best-managed banks, and which, with trifling changes, 
to suit banks having only one Teller, etc. , can be adopted by any bank : 



FIRST NATIONAL BANK OF BOSTON. 
No. 140 State Street, .189 



Your Note for Dollars Cents is due this day, and you 

are requested to pay the same to the PAYING TELLER. 

J. JONES, Cashier. 



UJ 

o < 



Boston, J 89 

Please call at FH^T J^JPIGNflll WW and accept a 
Draft by upon you at for Dollars Cents. 

J. JONES, Cashier. 



THE COLLECTION DEPARTMENT AND MESSENGER. 



77 



**•• 

* • 

* H * 

* g * 

* I * 

* 5 • 

■ 5C 






* 3 • 

* * • 

* S * 

* S • 

* <-; * 



^ 



You are requested to pay your NOTE for Dollars 

cts. due this day, to the Receiving Teller of the 

FIRST NATIONAL BANK. 

J. JONES, Cashier. 



ooooo 

Or .O 

O . p 
O "g o 

o\ * p 

8 i I ; § 

o 3 o 

o «° o 

o © o 

o 2 !o 

o H p 

os 5 c 

Oj * P 

o^ — o 
ooooo 



Boston. 



189 



You are requested to pay your ACCEPTANCE for 
Dollars cts. due this day, to the Receiving Teller, at the 
FIRST NATIONAL BANK. 

J. JONES, Cashier. 



Eorm 16. 

If you are so located as to be obliged to notify parties who are not 
entirely familiar with the routine of banking business you may wish to 
add to your notice (as per Form 17) the point of days of grace, which 
relic of old times is still a cause of much confusion : 



THE FIRST NATIONAL BANK, 



XjIzcstooilin-, ZMZ^iietie. 



To 



Your 



for _ _•„ Dollars 



becomes due at this Bank _._. 18 

which is the last day of grace. 

HOURS • \ From 1 P - M * t0 3 P - M « 

(Saturday afternoons not opened. 



J. F. JONES, Cashier. 



Form 17. 

Below is a curiosity in the shape of a very old-fashioned bank notice, 
which shows how these things were gotten up in the days of our fathers : 





Boston, Nov. 17, 1821. 


Your note for Dollars and 


Cents, lodged for collection. 


and you are requested to pay the same. 


GEO. HOMER, Cashier. 



78 PRACTICAL BANKING. 

Next after having a good form comes the duty of filling it out 
correctly and delivering it properly both as to place and time. 

Banks are not, by law, obliged to send notices to the makers of 
maturing promises held by them for collection or under discount. Yet 
the custom of doing so is, in the States, universal, and about as 
binding as a legal statute. 

When a party signs a promise to pay, he should be careful to make 
the promise payable at some specific point ; and, at its maturity, make 
himself there, money in hand, to pay it, notice or no notice. 

But, the bank having undertaken to do this notifying, and placed 
the makers of the paper in expectation of being told when and where 
to meet their notes and acceptances, should attend to the business 
carefully and promptly. 

Any failure to do so is neglect and carelessness, and is likely to 
bring to note-signers and banks annoyance and perhaps loss. 

There is one system of making out and delivering these notices that 
has many points in its favor, which is to have all the notices made out 
at the time the paper is received into the discount and collection 
departments, without regard to the fact that the time of maturity is 
yet a great way oil. Keep the notices on file in the order of their 
maturities and deliver them as the maturities draw reasonably near. 
This plan has several advantages. With the notices before him at all 
times, the Messenger can mail and deliver at his own convenience and 
fully avail himself of wholesale deliveries — that is, can pick from his 
file many notices for one house and deliver them in a lump. Then 
under this system the notices can most readily be made out direct 
from the face of the paper and not from covers or records ; and by so 
doing notices which have been correctly drawn may correct errors in 
filing or covering. 

A point which bank officers are often at a loss to decide is the question 
whether to send notice of a note written payable at a bank to that bank 
or direct to the promisor. There is no general rule with the banks in this 
respect. In their action they are apt to be governed by circumstances 
and a previous knowledge of what the promisor would like and expect. 
In view of this absence of rule and custom it would be well if all 
promisors would minute on the margin of their notes the point to 
which they would prefer the notices to be sent — whether to the bank 
where they are payable or to their place of business. 

There was at one time in vogue with our banks a curious old custom, 
an English importation, of keeping a notification record book. This 
book was kept by the Messenger. In it he recorded just how and where 
he delivered all his notices of maturing paper. I have had oppor- 
tunities of looking into one of these ancient record books. In it were 
the most minute statements of the way the Messenger had scattered 
his notices. In one line would be a record of a notice left at the place 
of business of some promisor whose office was shut, which obliged 



THE COLLECTION DEPARTMENT AND MESSENGER. 79 

the Messenger to shove the missive under the door. Another minute 
would be to the effect that a certain promisor's place of business could 
not be found, and that his due notice was delivered at his house in 
such a street at a time of day named. And so the records ran along. 
This book, and these methods, show that more care was taken in the 
old days in the matter of delivering notices to call and pay than at the 
present time. 

THE MESSENGER AND HIS COLLECTION DUTIES. 

A Messenger is sure to be found on the staff of banks which have 
many departments of work and a number of officers. In fact, almost 
all banks, small as well as large, are apt to have a Messenger even if 
they double up in some departments and run along on a limited corps 
of clerks. Some of the great banks in the Clearing-House cities have 
a large number of Messengers, and there are several which have at 
least a dozen. The duties of this officer vary with the circumstances 
under which he labors. In some banks he may give his whole time to 
what may be termed legitimate Messenger work — presenting drafts, 
delivering notices, making cash collections on coupons, drafts, etc. , and 
doing the bank's post-office business in the town or city where it is 
situated. The Messenger in a small bank having no janitor opens the 
doors in the morning, closes them at night, takes care of the rooms and 
does all the outside errands. Honesty, accuracy and abihty are 
qualifications essential for the proper discharge of the duties of the 
position. 

Many faithful Messengers are doing good service who entered into 
the work when mature in years, having spent a large portion of their 
lives in other occupations from which they have turned to banking 
when unable to secure employment at their trade. Men of this class 
are generally content to work without the wish or hope for promotion, 
since their ambition in life as well as capacity for getting on have been 
somewhat weakened by service and disappointment elsewhere. Other 
Messengers are alert and bright young men who have gladly stepped on 
to this lower round of the bank ladder with the determination to spring 
to a higher rung at the earliest opportunity. 

The position has many advantages, viewed as a school of preparation 
for higher duties, and any young bank Messenger may reasonably hope 
to secure rapid promotion if he does his duty and avails himself of every 
opportunity of qualification for a higher place — that is, provided he 
has natural fitness for the banking business. If he has not he is pretty 
sure to remain in the first place he is put on entering a bank. Prompt- 
ness, carefulness and courtesy are highly desirable traits in a bank 
Messenger. 

I interpolate these few words on Messengers in general right here, 
because I want to speak next of the Messenger's part of the collection 
work and of the varying forms of the business paper which he has to 
handle— and handle intelligently. Of course, he has behind him and 



80 PRACTICAL BANKING. 

overlooking him the clear-headed Collection Clerk, but there is abundant 
room for the Messenger to exercise care and use his acquired knowledge. 

In presenting drafts for acceptance or payment, it is always 
extremely desirable that the drawees shall be found in person — that 
the papers shall be actually presented to, and seen by, the parties upon 
whom they are drawn, and some sort of answer to them secured at the 
earliest possible moment. 

If the parties positively decline to honor the paper it is an excellent 
plan to have them jot down themselves a simple statement of the 
reasons for their refusal. Such explanatory answers, noted in the 
drawee's own handwriting, prevent a vast amount of misrepresentation 
and misunderstanding, and are very valuable, and convenient for 
return to depositors and correspondents who have sent in the paper for 
collection. 

In the everyday collection work of a large bank singular answers of 
the class we have suggested as being desirable are often turning up. 
Here is an illustration of this point : 

The amount of the draft was $3. It came all the way from an 
interior bank in Pennsylvania, through a New York bank, i o a Boston 
bank, for collection. It was drawn at sight, and bore several endorse- 
ments. It was drawn on a bill of lading of a small lot of bottles. The 
Messenger found the bottle man— the drawee. He refused to accept or 
pay the Messenger, and said he would note his refusal reasons on the 
back of the draft. This he did by writing as follows, on the back of 
the draft, saying as he finished, after long struggles over the work of 
composition, that he would have written more if there had been room 
on the draft : « . Boston, August 25th, 1890. 

* ' Birmingham Dear Sir : your Botles was to be delivered to me free of 
expence, whitch thair was and expence of 80 cts and 9 brocken ones I will pay 
tow dollars and know more. " Phineas Johnson." 

In Massachusetts, and, I think, in most States, drawees have 24 
hours in which to decide whether or not they will honor drafts drawn 
upon time. This 24 hours' grace is a notion that we have copied from 
English banking and business practice, and is based upon sensible ideas. 
It has been adopted mainly for the purpose of giving drawees time to 
examine goods, books and invoices. 

When a time draft, drawn payable from sight, is accepted at the 
expiration of these 24 hours, the acceptance must date from the day of 
first presentation. 

With drafts payable on demand, a settlement before the close of 
banking hours (on the day they are presented) covers the requirement. 

In case of absence of drawees, a presentation at their places of 
business, and the leaving there of the draft, or a notice of it, is, of 
course, sufficient. 

Still, my advice to the Messengers is always to see their men person- 
ally, and get direct answers from them if such a thing is possible. 



THE COLLECTION DEPARTMENT AST) MESSENGER. 81 

Misunderstandings, fault-finding and losses are by such a course often 
avoided. 

And the Messenger should always remember to give just as much 
care, system and consideration to the smallest draft as to the largest, 
and should be just as particular and just as courteous in his dealings 
with those drawees whose business may seem to him insignificant as 
with his heaviest customers. 

It was a draft on ISew York for $25, drawn at sight, by some party 
way off in the West, upon a man the Messenger had never heard of. 
The Messenger turned to the directory and found the name and location 
of the drawee. On calling on this address, he did not find the drawee 
in, and found that he had only desk room there, and somebody in the 
same room told the Messenger that his man was out of town and 
might not be back for many days. The Messenger made no further 
endeavors to collect the draft — may even have neglected to leave a 
notice of it — and it went to protest. 

A few days after a most excellent man, who turned out to ' be the 
drawee on this draft, called, saying he had heard of the protest, but 
had neither seen nor heard of the demand on him until he received 
notices of protest. Said the Messenger could not have searched for him 
properly or made a due presentation. Was sorry for the affair, because 
the non-payment of the draft had cost him several hundred dollars, 
since it was a bill for a portion of taxes upon Western lands, the non- 
payment having led to their sale for taxes and loss to him as specified. 

A valued correspondent has suggested that I say a word or two for 
the benefit of drawees and regarding some of their duties in the matter 
of responding to the paper which is drawn upon them. 

He agrees with me in pressing upon bank messengers and notaries 
the great desirability of seeing personally, if possible, the parties upon 
whom drafts for acceptance or payment are drawn; yet he thinks 
drawees ought to be forcibly reminded of their bounden duty in the 
premises. And one of the most prominent of these, is the duty of being 
on hand at their regular places of business, during legitimate business 
hours, to attend to the drafts which advices have told them are liable 
to be presented to them. 

There are two standing grievances which bank messengers have 
against many business men. One is their chronic habit of being absent 
from their offices when they are wanted to settle drafts drawn upon 
them, and the other is their careless custom of not promptly making 
returns to the collecting bank, within the legal time, upon the drafts 
which have by courtesy been left at their places of business during 
their absence. I have purposely said "left by courtesy," because, 
after a due presentation of a draft, at a drawee's office, the bank Mes- 
senger has done his duty if, in the absence of the drawee, he leaves 
notice and takes his draft back to his bank. 

But, if by courtesy he leaves an unsettled draft and notice with the 



•82 PRACTICAL BANKING. 

•drawee, it is the duty of the drawee to make returns upon it within 
the legal time. And if he has, by constant neglect of this duty, put 
the Messenger to the trouble of steadily going a second time for drafts, 
he has no reason to complain if the Messenger concludes to leave no 
more unsettled drafts at that office. 

The following incident may illustrate a third point in the matter of 
dealing with the Messenger : 

A Messenger was handed by the Collection Clerk a sight draft upon 
a well-known lawyer, which he was instructed to collect or get ac- 
cepted, for sight drafts in the locality of this banking incident carry 
grace. He took out the paper on his morning route, and in due time 
found himself doing as he had been instructed — presenting the draft 
in question to the famous lawyer. This drawee did not seem pleased 
i\dth the sight of it ; in fact seemed to look upon its very polite pre- 
sentation by the bank Messenger as an unwarrantable intrusion if not 
an actual impertinence ; and the only response he offered was in the 
.shape of a gruff enquiry of what he wanted to have done about the thing, 
anyway. The tones of the drawee were so overpoweringly forbidding 
so like muttered thunder — that the Messsenger, who knew very well 
-who he was interviewing, could barely muster courage to tell him 
that he would be pleased to have him either accept or pay that draft. 
lEven this simple reminder was too much for the equanimity of the 
lawyer. This being asked to respond — to pay — by a bank runner was 
to his mind something not to be tolerated. What ensued is best given 
in the language of that bank Messenger. "I am,'' says he, "the Very 
man who was kicked out of the office of Daniel Webster for asking 
±Lini to accept or pay a draft. " The Messenger is a man of fine imagin- 
ation. He did not mean to have it understood that there was actual 
physical force used in refusing to respond to that paper ; but he does 
mean to say that he was ordered out of that drawee's office by a man- 
ner so peremptory that it seemed to him about equivalent to a 
forcible ejection. Those who have seen Daniel Webster in a dis- 
pleased mood will understand the situation. 

The terms in which drafts are drawn often vary widely from the 
ordinary forms and these variations or other circumstances continually 
call for decisions from those in authority as to the proper course to 
pursue. 

Here is a novel form of a time draft, which some drawer, with 
original ideas on the subject of draft drawing, has framed. As it 
happens to come through my hands for collection, I am called upon to 
settle its bearings. It reads thus : ' ' On demand, fifteen days after 
date, please pay to order," etc. We present it to the drawee for 
acceptance. He happens to decline to honor it, on account of the 
incorrectness of its amount, and now the question comes up whether 
we have a right to make an immediate presentation of a draft written 
.as this is "'on demand fifteen days after date "—a time yet a long way 



THE COLLECTION DEPARTMENT AND MESSENGER. 83 

off, and whether, having presented it, and failed to get it accepted, we 
have a legal right to protest it at once for non-acceptance. 

There is, at first sight, an impression conveyed by a draft thus 
drawn that the drawer did not intend that it should be presented till 
fifteen days after date, and that we really have no right to present or 
protest it for non-acceptance till that time. After due consideration, 
the conclusion is reached that the only safe way is to make an 
immediate presentation, and protest at once if not accepted. 

Another conclusion is also reached at the same time, which is that 
it is a very poor plan for anybody to draw a draft in this ambiguous 
way. 

There is a second question which also comes up in connection with 
this draft. It is payable at a point where grace exists, and the question 
now is whether a draft payable ' ' on demand fifteen days after date '' 
carries grace. This question is quickly decided in the negative. 

Curiously enough, to add to the complications of this draft even a 
third question attaches to, it. It is drawn on J. Robinson & Co. It 
should have been on J. W. Robinson & Co. The goods which it covers 
were thus consigned. There is no J. Robinson & Co. in the place, and 
J. W. Robinson & Co. fully recognize that the draft is for them. 

Some bank has told the drawees that if they accept they must 
accept as drawn — not accept by writing the correct name of their firm 
across the face of the draft, but accept by putting on the name of a 
firm which does not exist simply because the drawer has so written it. 

This is all wrong. No matter how the draft may be drawn, the 
drawee who accepts must accept in his correct name. 

We have often heard payees of checks, which had been filled up 
incorrectly, in the matter of the name of the payee, advised to write 
their names to agree with the face of the check. This is very poor 
advice. An individual or firm should never vary signatures in this 
way, even in the slightest point. 

Here is another illustration. 

The bank received, in due course of business, from a distant corres- 
pondent, a draft for collection, with a bill of lading of some hundreds 
of bushels of potatoes attached, which read pay so many hundred 
dollars "on arrival of the potatoes," and which was drawn upon the 
captain of the potato schooner. The Collection-Clerk of the bank 
receiving this potato-timed draft, whose maturity was to be determined 
by the arrival of the schooner with the potatoes described in the bill of 
lading accompanying it, took charge of the paper, and at once began 
to watch carefully, with the assistance of his Messenger, for the coming 
schooner. Considerable time elapsed and nothing was seen or heard 
by the bank of the drawee or his consignment. Meantime, it appears 
that the schooner had really got in, unobserved, discharged her cargo, 
in a perishing condition, and, with the drawee captain, sailed away 
again. In the end, the draft remaining uncollected, and the potatoes 



84 PRACTICAL BANKING. 

going to complete ruin, the bank which forwarded the paper for collec- 
tion took the ground that their collecting bank had not exercised due 
diligence in the matter — had been guilty of carelessness and neglect — 
and charged them with its full amount which amount this collecting 
bank finally allowed its correspondent. 

There could not well be a more awkward position for a bank 
Messenger to occupy than that of a searcher after a drawee who was 
afloat and liable to arrive and leave again at any time. Nor could 
there easily be framed a more objectionable form of a draft than the 
one we have here described as payable upon the arrival of a perishable 
cargo whose time of coming and place of discharge was quite unknown 
to the holders of the paper. 

In another case — that of a demand draft for $200, drawn by a party 
in Nova Scotia upon a consignment of live fowl — a question came up 
which the parties considered a very vital one. 

The drawee told the Cashier of the large city bank which held 
the paper that he could not pay it because it had been drawn for 
too large an amount. The bill of la ding was attached to the draft, 
with instructions that it must not be delivered until the paper was 
paid. The chickens, which were named in the bill of lading, had 
arrived by steamer, and now lay upon the wharf in their big coops. 
As the consignee turned away from the Cashier, after declining to have 
anything to do with the paper, he suddenly thought of a disagreeable 
feature of the situation, and came back to the banker, asking with 
some little anxiety, "What will become of the chickens? Who will 
feed them, and give them water, since no one will accept them?" 
Here was an unpleasant dilemma. The poor birds might starve if the 
draft went to protest. After some little talk over the complication the 
drawee said he supposed the bank would not consider it its duty to 
look after the chickens, and he would therefore take the risk of going 
to the expense of doing it himself. He might not in the end get his 
pay out of anybody, but he did not mean to see the birds suffer. 

Quite often complications like this arise. Cases frequently occur 
where drafts are drawn upon consignments of perishable articles which 
the drawees will not take because accompanied with liabilities in 
excess of their value. In such cases the merchandise may go to ruin 
while the draft covering it is being protested and returned to its owners 
at some distant point. A thoughtful and judicious use of the tele- 
graph wires may, in some instances, save these unpleasant results. 

Still another draft, accompanied by a bill of lading covering a 
shipment of a lot of flour read thus: u On arrival of goods please pay 
to order of First National Bank $1000." It came forward for collec- 
tion, in due course, from a bank in the West to a bank in an Eastern 
city and was presented to the drawees, who replied that the goods 
had not arrived, but that they would pay it when the goods did 
come to hand, since the paper was all right. They further said the 



THE COLLECTION DEPARTMENT AND MESSENGER. 85 

flour upon which this bill was drawn might not arrive for several 
weeks. The draft bore several endorsements, and had been invoiced 
to the collecting bank without any special instructions not to protest 
or to hold for any time. Under these circumstances what was the 
correct course for the bank to take with it ? Undoubtedly it was the 
duty of the bank to present it at once for payment. If payment was 
refused, under the claim that the goods had not arrived, it was the 
duty of the bank to obtain its acceptance, which would amount to a 
guarantee of the drawees that it was right, and that it would be paid 
by them in accordance with the tenor of its face. In the event of a 
refusal of the drawees either to pay or accept, the holding bank should 
protest for non-acceptance. 

It is far better for all parties concerned that drafts should never be 
drawn in this manner — on this awkward time. The collection-holding 
bank has no means of knowing when the draft matures — when the 
goods arrive — except from information furnished by the parties upon 
whom the draft is drawn. 

Under some circumstances banks would be justified in refusing to 
receive such paper. 

Perhaps the question arises from other causes than the manner of 
writing the draft. 

A time draft for $10,000 was drawn upon a house in Chicago by a 
person in New York. In working its way through for collection it 
passed into the hands of a bank in Chicago, which presented it to the 
Chicago drawees for acceptance. The draft was not drawn payable at 
any special point in Chicago; but the drawees in accepting made it 
payable at their own bank. The Messenger presenting the draft 
objected to this form of acceptance and took the ground that it was 
what is termed a qualified acceptance which changed the tenor of the 
paper and which he had no right to permit. The point was referred to 
the Chicago bank, and the general question of the right of an acceptor 
to alter the tenor of a draft by accepting it with the condition of 
making it payable at some bank or office was fully discussed. 

It seems that the English courts long ago decided that alterations of 
the character in question could not be permitted and that the drawee 
of a draft must accept it just as it is drawn if he accepts it at all. To 
meet the difficulty which was the outcome of this decision Parliament 
passed a law providing that acceptances made in this qualified manner, 
and making drafts payable at a bank when they had not been so 
drawn, should not be deemed qualified acceptances but proper and 
legal ones. 

In this country there have not been any special enactments covering 
the point in question, but our courts have always held precisely the 
same view that is expressed by the English law, that an acceptance of 
a draft not originally made payable at a bank whereby it is made 
payable at some particular bank in the place on which it is drawn is 



86 PRACTICAL BACKING. 

not what the law considers a qualified acceptance but is, on the 
contrary, a legal and satisfactory honoring of the draft. In the case 
we have cited the drawees were right in claiming the privilege of 
accepting their draft payable at the bank and the collecting bank 
safely approved the act. 

In another case the bank received from a corresponding bank a 
draft for acceptance and collection which bore endorsements and 
was drawn for $5,000 upon a party described upon the paper as being 
in business in the place where the bank receiving the paper for collec- 
tion was situated. But this bank happened to know positively that 
*he drawee had transferred his place of business to another city, and 
inew the number and street where the drawee was now to be found, 
i'he Collection-Clerk asked the Cashier what should be done with the 
draft, whether it should be protested for non-acceptance, since the 
drawee was not in the city, or sent to the actual place of business of 
the drawee, where, without doubt, its acceptance could be obtained. 
There was some little discussion between the officers over the point, 
and the Collection-Clerk claimed that in ' ' Daniel on Bills and Notes " 
the position was taken that a draft could not be be protested for non- 
acceptance until it had been presented at the actual place of business 
of the drawee ; that, at any rate, any other protest would not hold the 
drawer or endorser. But, Daniel or no Daniel, the bank finally came 
to the conclusion that the only safe and proper course was to present 
the draft as drawn, and protest it in the city of the bank receiving it if 
not accepted. Cases like this often come up, and the course taken in 
the example cited is the correct one. Drawers of drafts should draw 
them on the right parties in the right places, and banks which handle 
them for collection should, in the absence of other instructions, follow 
the address upon the face of the paper as far as the town of the drawees 
is concerned. 

In the following instance the address became of the nature of special 
instructions. 

The draft was sent me for collection by a bank in New York — sent 
to me in Boston in the regular course of business. It was drawn at 
sight by some one in Washington, bore several endorsements, and the 
drawee was addressed New York — that is, the draft was apparently at 
first regularly drawn on a drawee in that city or who was supposed to 
be there. But when the draft reached me there had been written in 
pencil, underneath the name of the drawee, without any obliteration 
of his New York address, "Hotel Brunswick, Boston." My Messenger 
presented the draft for acceptance or payment, and was told that 
there was no person there of the name sought for — nothing known 
there of the drawee. What should be done with the draft under these 
circumstances ? I had it protested. The fact that it was drawn on a 
party first set down as in New York, and not otherwise addressed, 
except in a pencil memorandum underneath, saying, "Hotel Brans- 



THE COLLECTION DEPARTMENT AND MESSENGER. 87 

wick, Boston/' did not justify or render it safe for me to omit to protest 
in Boston. The New York bank which sent the draft to me in this 
shape — that is, with a Boston address noted upon it — could not expect 
me to do otherwise than protest it if not paid, though it had omitted, 
to give me special instructions and had not crossed out the first address 
when it permitted it to go forward through me to its second address in. 
Boston. 

I recollect also an instance when the Messenger was given a draft 
upon a house, drawn upon three months, for $5,000, and was instructed 
to procure its acceptance. This he did, and brought the accepted- 
paper back. Shortly after his return with it the acceptor came in great 
haste to the bank, saying that through an error of his Book-keeper he 
had accepted the draft by mistake when he was owing the drawer only 
a trifling amount, and asked that he might be permitted to erase 
his acceptance and cancel it by drawing his pen across it. This 
the Collection-Clerk of the bank was not inclined to permit. He' 
never happened to have a case of this character before, but he was, 
instinctively reluctant to allow the proposed mutilation of the draft. 
The matter was finally referred to the higher officers of the bank, who 
very correctly refused to have the acceptance erased. 

Such a case as this is not very unusual. The only course for the 
bank is to hold on to the name they have in good faith secured. The 
bank is acting simply as an agent, and cannot positively know all the 
circumstances which may environ both ends and the indorsements of 
the draft, and it is not, for these reasons, safe for it to assume the 
responsibility of allowing the withdrawal from it of a name which it 
has secured. 

The course open to the drawee under the circumstances we have 
described is to notify at once the various parties to the draft that he 
has made a mistake in accepting it and shall not pay it — that he has 
stopped its payment. 

If a contest over the matter arises the Courts may have to step 
in and settle it. 

Then again, take the matter of action under powers of attorney., 
A bank holds for acceptance a draft upon a party. It presents it- 
Is met by an attorney, who says his power is on file at a certain 
bank. Messenger calls at the bank named and finds it there. He 
takes the attorney's acceptance in place of that of the principal. 
Drafts on the same party continue to come along ; and the Messenger 
continues to take attorney's acceptance on the strength of the fact 
that he has once seen the power. But this power may have been im- 
mediately withdrawn from the bank where it had been left — revoked. 
How is a bank to avoid the dangers of such a contingency as this £ 
The Messenger cannot go every day to see if that power is still where 
he first saw it. In practical banking he does not do so. 

It can onlv be said, in view of such cases as this, that banks must 



88 PRACTICAL BANKING. 

exercise proper care, due diligence and good judgment, and assume the 
common risks of doing business of any sort. 

Perhaps the Messenger will occasionally run across a party who 
objects to receiving his endorsement on the draft as a receipt for its 
payment, but as he is the officer of the bank who, as its representative, 
actually takes the payment, his receipt — his endorsement upon the 
back of the paid and surrendered draft — is certainly as good as that of 
the Cashier and will bind the bank and secure the payer equally as 
well as that of the latter. 

Some drawees, however, are very set in demanding a Cashier's 
endorsement. To give them this endorsement requires that the 
Cashier shall endorse payment received upon the paper in advance of 
its presentation by the Messenger, and when he is really entirely igno- 
rant whether it will be honored or not. This is a practice neither safe 
nor convenient. It is not safe, for the paper bearing his receipt may 
be lost while in transit ; it is not convenient, because the paper will 
have to be mutilated by an erasure of his endorsement if it is not 
finally paid. 

While I am speaking of this out-of-door work let me mention a risk 
or danger of another character. I refer to the danger of actual 
assault or theft to which the Messengers are unavoidably exposed. 

In the presentation of drafts and delivery of notices they are, 
particularly in our large cities, often called upon to visit disagreeable 
localities and to enter shops, houses and stores of an unsavory character. 
But these features of their business give them but very little thought 
or anxiety. They go their rounds resolutely and faithfully, giving little 
heed to the men or the surroundings they fall in with, their only aim 
being to get at the right numbers and persons as expeditiously as 
possible. 

On other errands the bank's "Out-Tellers," as they are termed in 
X<ondon, are daily obliged to carry about the streets a deal of money, 
valuable papers, stocks, bonds, etc. 

Where unusually large amounts of cash, or securities, are to be 
moved through the streets, as in paying and receiving heavy balances 
at Clearing-House, it is an excellent rule never to permit the Messenger 
•carrying these large sums to go alone. Many city banks and bankers 
make it, for instance, a rule that none of their Messengers shall carry 
about the streets the sum of ten thousand dollars and over without 
having another man go with them. 

There are a variety of opinions regarding the best way of carrying 
money and valuable papers about the streets. I am of the decided 
opinion that all bank messengers should put their valuables in wallets 
—that they should never be allowed to carry them in their hands, and 
fully exposed to view, as many of them seem determined to do. And 
I think it a good plan for the bank messengers in large places, who 
have a good deal of steady work in the way of carrying about the 



THE COLLECTION DEPARTMENT AND MESSENGER. 89 

streets large sums, to have their wallets chained to them, as is the 
general rule in such work with the bank messengers of London. 

Some Messengers who go on, year after year, carrying money about 
our streets, in all sorts of ways, without losing anything, grow careless, 
and also grow set in their way of so carrying their money, no matter 
how objectionable that way may seem to be to their superior inside 
officers. These Messengers need to be reminded from time to time of 
the many street assaults and robberies which have been made on men 
in their business, and of the methods which have been practised in 
making these snatches, as well as that it is a well-established fact that 
the thieves of our cities know well every bank messenger, and have 
made their street money-habits a study. 

After all I have said regarding the advantage of intelligence on the 
part of the Messenger as well as the other clerks it may sound singular 
that I should finally say of him that he should at times, when under 
instructions from responsible officers be but an intelligent machine — 
acting strictly in the line of his orders with care neither to add to nor 
take from them — for in many cases he is called upon to bear messages 
and do general errands the bearings of which his superiors have no 
time to explain and of which he can perhaps know but little. 

I add an illustrative anecdote the hero of which, I will however 
admit, was quite a raw hand. 

A note, bearing endorsements, was due, and at the close of bank 
hours it had not been paid. As it was signed by a well-known house 
which was in the habit of promptly meeting all its engagements the 
President presumed that there had been some f orgetfulness or mistake 
somewhere and told the Messenger to take the note to the promisors 
and endeavor to collect it from them, giving them a chance to pay it 
before it should take its otherwise inevitable path to the hands of the 
notary. This action under such circumstances is what every bank 
should follow. It is always good policy to save good notes from pro- 
test, the failure to meet them often being simply the result of some- 
body's error. 

In the case in question the Messenger presented the note, demand- 
ing its payment. "When the promisors told him they had made a 
mistake and forgot the paper but would pay it the next day the 
Messenger said "all right," and took the note back to the bank, to 
which he made no report of the way he had committed himself. The 
note not being paid was protested. The next day its signers came to 
pay it and were very indignant over its protest, because the represen- 
tative of the bank had told them that it was "all right" when they 
said they would pay it to-morrow. 

The matter in question caused so much trouble and annoyance that 
that bank Messenger never afterwards ventured to say "all right" 
except when specially instructed to do so. 

I think we have now pretty well covered the Messenger's part in 



90 



PRACTICAL BANKING. 



this collection work and we will look at some other points in relation 
to the forms of business paper and other questions which may arise. 

"IN EXCHANGE" AND "WITH EXCHANGE." 
These expressions or stipulations, when incorporated into the body 
of a note, or an acceptance, are certainly equivalent to a promise to 
pay an uncertain amount, on conditions, and, in the opinion of many, 
have a tendency to lay the instruments in question open to the charge 
of being of a non-negotiable character, for it is a very old rule that a 
negotiable instrument must promise to pay a definite sum and that only. 
There are few experienced bankers who would not gladly join in a 
recommendation that all use of such expressions as we have named be 
forever abandoned. But the often used term of payable ' ' in exchange " 
is decidedly more objectionable than the "with exchange " formula. 

In order to make the points we have in hand very clear, I here give 
the two forms as seen in regular use (see Forms 18 and 19) : 



'sddLlsyo 



after dnle^: promise tojDay 




zsdJk'Dollars 



9 




- <^3fa^2d&L<$ter da 




1 to the 



promw; to pay 



Payable at 3sr<£ #7 




.<-- 



J4&. 



>6Usrt^ r I) o lla rs 






Form 19. 

The first note (Form 18)— the "with exchange on New York" paper 
— carries with the promise, in banking usage, the agreement that the 
Chicago promisor shall pay, in addition to the face amount of the 
paper, the cost of putting the same in New York — the expense that 
would be necessary in order to buy a draft on a New York city bank 
for the same sum. 

But the ambiguous and obnoxious expression in the other note 
(Form 19), payable "in New York Exchange," though often used with 



THE COLLECTION DEPARTMENT AND MESSENGER. 91 

the intent of being understood as entirely synonymous with the "with 
exchange" clause, is open to a very serious objection, and the bank 
which attempts to collect paper drawn in this manner is liable to find 
itself in an unpleasant predicament. 

It is claimed that the Chicago payor of paper of this type, whether 
a note or a draft, has the right to tender in its payment such a draft 
on New York as he may please, such a ' ' payment " coming within the 
scope of the agreement to pay "in New York Exchange." 

If the collecting bank attempts to discriminate regarding the 
character of the exchange on New York that is offered and raises the 
question whether or not the tendered exchange is of good repute it 
may find itself in an unwelcome controversy with the payor, and it 
may, in the end, be difficult to say who has the right to decide upon 
the repute of the exchange tendered. 

Banks should set their faces strongly against the use of such a form. 
They have often taken the very sensible ground that they would not 
undertake to collect paper of this description, unless the owners of the 
paper would assume the entire responsibility incident to its irregularity. 

INTEREST UPON GRACE. 

His note was written payable six months after date, with interest at 
six per cent. , and made payable in a State where grace prevailed. He 
called at the bank which was holding the note for collection on the 
last day of the six months and tendered to the Teller the face of the 
paper with interest to this day — interest to its maturity without 
counting in the three days of grace. The bank, which was holding 
the note for collection for account of one of its depositors, refused 
to settle the payment in this manner, and demanded interest upon the 
note to its last day of grace. The signer of the paper demurred most 
decidedly to paying this three days' grace interest, but the bank very 
correctly insisted that the matter must be settled in this way, and in 
that manner it was finally adjusted. 

The claim for the interest for the three days was just as equitable 
and legal as the claim for that of the six months. Where grace is the 
law the due time of paper issued there is as firmly fixed at the expira- 
tion of grace as it possibly can be. 

There is an interesting point about note paying that may be noted 
in this connection, and that is that a holder of a time note is not 
obliged, and cannot be compelled, to accept its payment before 
maturity. In the case of the note on six months, with interest, which 
we have just referred to, a tender of the principal and interest to the 
last day of grace could not compass the settlement of it, and could not 
secure to the signer possession of the paper unless the holder so elected. 

DRAFTS WITH BILLS OF LADING ATTACHED. 

In collecting documentary paper great care has to be taken in 
several points. A bank receiving for collection paper with a bill of 



92 PRACTICAL BANKING. 

lading attached, where instructions come with such paper to deliver 
the bill of lading only on payment of the draft, must be exceedingly 
careful in taking checks for such payments. In the next place the 
bank should bear in mind that in handling a bill of lading it becomes 
for a time the custodian, as it were, of merchandise, and that this 
merchandise may be of a perishable character. In several cases banks 
have lost heavily by negligence in presenting for acceptance or payment 
drafts of the character in question. 

Then if the paper is drawn upon time there is the question of the 
delivery of the bill of lading upon the acceptance of the draft. 

Since the peculiar decision of the Supreme Court of the United States 
apparently requiring holders of bills of lading accompanying time drafts 
to deliver them to the drawees on acceptance of the drafts unless 
otherwise instructed, the National banks of the country have not 
seemed to adopt any uniformity of action for such cases. At the time 
of the rendering of this decision the banks of New York issued circulars 
to their correspondents directing them to give special instruction in 
any case where they desired bills of lading held after acceptance of the 
drafts accompanying them. "Where the New York bank receives no 
special instructions to the contrary it invariably surrenders the bill of 
lading upon acceptance of the draft. In Boston many of the leading 
banks have taken the very safe ground that they must have from their 
correspondents in all cases absolute and specific instructions as to 
whether the bills of lading shall or shall not be surrendered. In cases 
where instructions are not at first sent with the drafts the mail or wire 
is at once used to obtain them, and, as twenty-four hours are allowed 
for acceptance of drafts, these required instructions ought in that time 
to be procurable from anywhere in the United States. This is by far 
the most prudent course of action and one which should be recom- 
mended for general adoption. Our reasons for holding to this opinion 
are found in the character of the famous Bill of Lading decision itself. 
A careful study of it will convince any one that the only safe course is 
that recommended, which has been endorsed by most eminent counsel. 

PAYING BACK MONEY. 
The note was payable at the counter of an adjacent bank. The 
bank holding it had discounted it for a dealer, whose endorsement it 
bore. At maturity the paper was presented and it was cashed. The 
same morning the bank which had paid the note discovered that it had 
done so in error; that the promisor had not the funds to meet the paper, 
•and that their Teller had committed a gross blunder in cashing the 
paper. They asked that the money be refunded. The repayment of 
the money was made with some hesitation, for it was now apparent 
that the promisor of the paper had failed. The money was returned, 
however, and the note taken back and protested. The endorser of the 
paper, who was a very sharp but perfectly solvent man, heard that his 
"bank had once collected the note, and on that ground refused to pay 



THE COLLECTION DEPARTMENT AND MESSENGER. 93 

it. In the end the Courts held that the endorser must pay because he 
had not been released or compromised by the collection and repayment 
in question. 

This interesting case is of a very suggestive character. Bank Man- 
agers and Tellers are always reluctant to pay back money which they 
have once collected upon endorsed paper which will in case of non- 
payment be thrown back upon third parties with whom they can have 
no immediate consultation. This is perfectly natural and justifiable. 
In all cases where the circumstances are similar to those described, 
where money is paid through a mistake by innocent parties acting for 
others, it is perfectly legal and good banking to pay it back. This 
point comes up very often, and very many bank officers, acting under 
a fear of incurring responsibilities similar to those which the endorser 
in this particular case endeavored to throw upon his bank, refuse point 
blank to refund payments which have once been made unless they are 
able to secure consent to this repayment from endorsers. 

In another case where there was no third party and the payment 
was intentional the problem put on a different aspect. 

It was an endorsed note for $10,000 and the day of its maturity had 

arrived. The promisor came to the bank which held it for collection 

for a correspondent and stated to the Cashier that the note was not to 

be paid, since arrangements had been made for its renewal, and asked 

if it had not been ordered home. The Cashier had received no such 

instructions, and said the note would have to be paid or protested. 

The promisor raised the money and met the note. The next day the 

Cashier of the collecting bank received an order by mail to return the 

note to the correspondent who had forwarded it for collection. He 

did not have possession of the note, but the money for it instead. To 

return the money to the promisor and get back the note would be 

assuming an unwarrantable responsibility in the absence of definite 

instructions from the correspondent to that effect, and the only safe 

course was that which the Cashier pursued. He wrote to the owner of 

the paper, told him it had been paid and passed to his credit, and asked 

him whether he should reverse the credit, pay back to the maker the 

money and take the note, or if he should let the matter stand as it 

was. Instructions came to follow the latter course and that ended the 

matter. 

HOW EARLY IN THE DAY IS A NOTE DUE? 

A bank discounted a note which was the promise of a depositor 
with^the bank. It had considerable anxiety about the reliability of 
the note, particularly as far as the signer was concerned. On the 
morning of its maturity the signer, who had made the note payable at 
the bank, had a balance barely sufficient to meet the paper. The bank 
very naturally made haste to charge the note against the balance. It 
did this as soon as it opened for business. During the rest of that day 
checks upon this early appropriated balance came flowing in, through 



"94 PRACTICAL BANKING. 

the Clearing-House and over the counter, and were, of course, refused 
payment. There was a legal contest over the question whether the 
bank had a right to seize the balance upon which checks were out- 
standing at so early an hour in the day and dishonor all the other 
demands upon it, the result being a final decision of the Court that 
the bank did right and that a note due on any given day might under 
the circumstances described and for the purpose of payment be 
considered as due as soon as the bank opened and not at the close 
of banking hours. 

UNPAID PAPER. 

When maturing notes and acceptances held by a bank under 
discount or collection for the account of its dealers remain unpaid 
at the close of banking hours on the day of their maturity, there are 
one of two courses for the bank Manager to take with regard to them. 
He may hand the paper at once to the Notary for protest (we are 
considering paper which bears indorsements) or, instead, dispatch his 
Messenger to notify either the promisor, acceptor or indorser — that is, 
to notify the first one likely to respond — that the paper remains unpaid. 
The latter course is the most judicious one in many cases. The parties 
to the paper who were to pay it may have forgotten it, made a 
mistake in entering its time of maturity on their books, or mislaid the 
notices. It may happen that the non-payment is owing to some error 
made by the bank in leaving with the promisor a wrongly-filled-out 
notice which has misled him. Whatever may be the reason for the 
non-payment in question, it is better for a bank, where it is dealing 
with parties who are believed to be responsible and are supposed to be 
ready to meet all demands upon them, to give them an opportunity to 
do so and to correct their errors before handing the demands upon 
them over to a Notary. Such a course of action cultivates a kindly 
feeling between the bank and the dealer, and in the long run helps the 
business of a bank by bringing it favor and custom. 

NOTES PAYABLE AT A BANK. 

The treatment of such notes varies in different localities. 

In Clearing-House cities it is a quite general custom to charge them 
in to the banks where they are to be paid on the day of maturity and 
in other places they would be presented at the bank by the Messenger. 
But the exception to such action is where the collecting banks happen 
to know that the maturing payable-at-bank notes which they hold will 
not be paid at the bank where they are made payable — that the 
promisors have not provided for their discharge in this manner, but 
intend to call at the bank which holds them for collection and pay 
them over its counter. 

When the note has been charged through the clearing there may 
yet be a question of its payment. In a recent case the bank held a 
note which was payable at a neighbor bank. As these two banks were 
located in a Clearing-House city the note in question was, at its maturity. 



THE COLLECTION DEPARTMENT AND MESSENGER. 95 

charged into the bank where it had been made payable by the bank 
holding it for collection. The rule prevailed in the Clearing-House 
arrangements of the place to which we are referring that all checks 
charged in, which were not returned to the banks before 1 o'clock of 
the same day, should be considered paid. Up to the date of the bank- 
ing incident of which we are writing the impression generally obtained 
that charged-in notes stood upon the same footing as checks — that a 
charged-in note, not returned before 1 o'clock of the same day, might 
be considered as paid by the bank to which it had been debited through 
clearing. Out of the lawsuit which arose over this particular case 
there was brought out a Supreme Court decision to the effect that 
notes were not to be considered the same as checks. The note in 
question, which was a very poor one, had been returned with the 
answer of "no funds " just before 2 o'clock — the hour of bank-closing 
in the place. It was ruled that this return was not too late to secure a 
refund of the money on it. 

This case was ruled on by the Supreme Court of Massachusetts. 

Bankers in that State, at least, now never consider a note which 
they have sent in through clearing as paid beyond question until they 
have sent to the bank to which it has been charged and received assur- 
ance of its payment, or, at least, until the close of bank hours has 
been reached without a return of the note. 

It does not follow positively, from the fact that a man has written 
his note payable at a particular bank, that he intends to pay it there. 
He has simply given an easily reached address where the note, if not 
otherwise taken care of, may be presented and a legal demand made 
for its payment, and he has also insured himself against accidental 
ignorance or neglect on his own part by making it positive that the 
note will be presented there before it can be considered dishonored. 
From the bank's standpoint it has long been a question whether notes 
and acceptances drawn payable at a bank should be considered 
in the same light as checks upon the bank — as orders to pay without 
further advice or instructions — and with us, banks which keep the 
accounts of depositors who have made their notes payable there, are 
not in the habit of paying such notes out of deposit balances unless 
the depositors have left with them special instructions so to do. The 
English view is that they should be considered and treated as checks. 
The London promisor or acceptor who makes his paper payable at a 
London bank knows that that paper will, at its maturity, be charged 
in through clearing to the bank where it has been made payable, and 
that it will be paid at the bank, if he has balance enough, precisely as 
if it was his own direct check upon the bank. In New York city the 
London idea prevails in general. There have been important decisions 
in the courts of this country contrary to this action. It has been held 
that the bank which, without special direction, pays paper made paya- 
ble at its place of business, performs a gratuitous service and assumes 



96 PRACTICAL BANKING. 

an unwarrantable risk. There are many good reasons for these views. 
The maker of a note may not wish to pay his note at all, concluding to 
stop its payment for some reason or other. A bank which acts in the 
matter without special orders, not having in hand a full description of 
the maturing paper which a promisor may wish to have it pay, assumes 
considerable risk in the possible payment of fraudulent paper. The 
banks of Boston have long taken this ground : parties who make their 
paper payable at a bank in Boston must, before its maturity, furnish 
that bank with a list, giving dates, amounts, and full instructions for 
payment, if they wish to ensure its payment out of their regular bal- 
ances. 

This last method of management is the one likely, in the end, to be 
the general custom in the United States. 

There is, however, a point relative to this matter which should be 
noted. A bank which has discounted a note for a depositor has the 
undoubted right to charge it to that depositor's balance if, at maturity, 
it remains unpaid. If it did not so act, it would certainly be in danger 
of losing any endorsers of the paper, through thus neglecting to secure 
its payment. 

CHECKS IN PAYMENT OF NOTES, DRAFTS, ETC. 
One of the most difficult questions a bank doing a heavy business 
has to deal with is that of how to carry itself — where to draw the line — 
in the matter of taking checks on other banks in payment of its matu- 
rities. Many of our city banks instruct their officers to take no uncerti- 
fied checks whatever in the premises in question. Having made such 
a rule they smooth away some of its obnoxious points by introducing 
as many exceptions to it as prudence and safety may dictate. The rule 
is in many banks a necessity ; the exceptions are also a necessity. Very 
few subordinate bank officers have the knowledge and the judgment 
required for a safe settlement of the question of what checks shall be 
taken and what refused ; and no experienced Teller, Messenger, etc. , is 
desirous, or even willing, to assume the responsibility of discriminating 
in this check business. The only way, therefore, is to set up for the 
bank clerks the rule I have named, and then have the Cashier and 
President at hand to approve necessary — desirable — exceptions, the 
bank itself taking the entire risk involved as a matter of wisdom and 
policy. Dealers are often offended by the rule in question ; but those 
most experienced and of the most solid credit are the last to be dis- 
pleased by it. The application of a little logic to the premises is often 
of service. Why should a bank go through the form and all the risk 
and trouble of taking on a hundred thousand dollars in bulky bonds, 
as collateral for a demand note, and then give up everything on an 
individual check ? It is often said that no decent man will tender a 
bank a check that is not a good one — that such a tender is a fraud, 
and all that. But I have known many most excellent men who have 
settled demands with checks which have proved worthless— proved so 



THE COLLECTION DEPARTMENT AND MESSENGER. 97 

through no fault of their own — for the deposits upon which these 
checks were drawn went back on them, being made up of checks of 
people who had failed. 

ACCEPTANCE AND RETURN. 

Banks are often called upon to send forward to various points for 
acceptance and return drafts which they may have received from 
depositors, who wish them handled through the collection department. 
and to be returned after acceptance has been procured, since t^ey are 
due a long time ahead, and the depositor, for that reason, prefers to 
hold them in his own hands until near maturity. 

It is not a good plan to send paper endorsed in blank through the 
mails, since it becomes, under such circumstances, negotiable in any 
hands into which it may fall, even without the assistance of a forged 
endorsement. 

It often becomes a question with banks how this acceptance and 
return paper shall be endorsed before it is sent forward. A good plan 
is to place over the last endorsement a stamp, making the paper payable 
to the bank which is handling it. 

With such an endorsement it is in good form for a journey through, 
the mails and in the right shape to go into the collection files of the: 
bank sending it forward when it comes back accepted. 

The only embarrassment in these cases arises when the customers; 
wish to take the paper back — to hold it themselves, after it has been 
accepted, till close on to maturity, at which time they may wish to 
put it into some other bank. In some instances they may wish to selL 
the paper after it has been accepted or may even wish to get it dis- 
counted in some quarter other than the bank through which it has 
been passed for acceptance and return. 

In such cases there seems nothing to be done except to run the risk 
of sending the paper through the mail endorsed in blank, or to submit 
to having it disfigured a little by putting on and crossing out what may 
be termed a simple transmission endorsement such as the one I have 
above mentioned. 

RESPONSIBILITY FOR COLLECTIONS. 

A bank receiving paper for collection payable at other banks, and 
which in due course sends such paper to those banks forcollection and 
remittance, is responsible for the conduct of its collection agents.. 
There have been suits at law where the question at issue and the 
verdicts and decisions fully cover this point, and my reader probably 
has at hand the means of turning to the record of these interesting and 
important cases. 

It is claimed that failed collecting banks have no right to cover in 
as a portion of their assets proceeds of collections made for their corres- 
pondents, and awaiting remittance at the time of their failure. It is; 
held that such special balances should be deemed fiduciary or trust 



D8 PRACTICAL BANKING. 

funds and not the property of the suspended bank. But all attempts 
to maintain this position have been upset by the Supreme Courts. 

Banks have in many instances attempted to hedge against all 
disagreeable collection risks and responsibility involved in the situation 
which I have explained by setting up at the outset certain disclaimers. 
I have before me a bank pass-book upon the cover of which is pasted 
the following notice : 

"This bank receives paper for collection as agents only, and does not hold itself 
liable for any loss or damage which may accrue through the default of any bank or 
banks to which said paper may be sent for collection.'" 

Years ago, under old State bank systems, notices of a similar 
description have been printed upon bank pass-books and posted in 
conspicuous places in bank offices. Such disclaimers can certainly be 
of no possible harm to the disclaimants, but it should always be borne 
in mind that they are, like disclaimers of responsibility on railroad 
"tickets or express receipts, resting upon very uncertain foundations. 
Courts often show them very little respect. 

The railroad tickets in use in England are solidly packed with an 
immense variety of disclaimers of every name and nature printed in 
^very fine type and supposed to cover every possible contingency which 
has proved to be of a disagreeable and costly character in past contests. 

Some time ago the London Times took up seriatim the disclaimers 
upon one of the tickets of a leading English railroad and showed how 
every one of them had been overthrown in English Courts. 

In a recent publication I have seen misleading views upon this 
subject, quite contrary to those I have advanced. 

The article in question held that the bank winch exercises diligence 
is not responsible for the conduct of its collecting agent — that, for 
instance, any loss occurring from the failure of the bank to which 
it had with good judgment and in good faith forwarded paper for 
collection would fall upon the owrer of the paper depositing it with 
the bank for collection. This is generally known in banking and 
collection circles as the Massachusetts view, and was at one time 
widely held. Parties who look up the point by referring to legal 
decisions not of a recent date are likely to similarly conclude that the 
responsibility rests with the owner of the collections. But comparatively 
recent decisions of the highest Courts have changed the whole aspect 
■ of the matter and throw the responsibility upon the first collecting hands. 

Another point : — the bank — the collecting agent — which undertakes 
to handle paper for third parties, and has the misfortune to lose the 
paper in the mails, in such case is the sufferer, and must bear the loss or 
trouble which may be the final outcome of the miscarriage. 

STRAY COLLECTIONS-" TRAMPS." 

Many banks, particularly the oldest and largest banks in our cities 
and large towns, are in the frequent receipt of paper — mainly checks 
and drafts from individuals located in other large places, where there 



THE COLLECTION DEPARTMENT AND MESSENGER. 99 

are plenty of banks — which paper they are asked to collect and remit 
for. There are several features of this sort of business which are of 
an objectionable character, and among them are these : The stray 
collections which I am referring to come to banks from parties whom 
they know nothing of, with whom they have no correspondence, and 
who have no claims upon them whatever. 

This dealing with entire strangers, who may have no character or 
responsibility, is a dangerous business, even though it is only in the 
way of a small collection transaction. 

The collecting bank is obliged to remit for the collections, if they 
are paid, its check on some central bank, most usually a New York 
bank. And, since these remitted checks are small, the danger in 
sending them to unknown payees is evident. 

I have known of instances where a collection business of this 
description has been ' ' cooked up " simply as a means of getting 
hold of small first-class New York checks, for the purpose of raising 
them to large amounts. Then, again, where these outside collections 
come from parties who have no dishonest intent, they are quite often 
collections that won't collect — checks that meet with the response 
of "No funds" — drafts that are neither accepted nor paid; and, as 
such usually come without funds to pay for their return in case of 
dishonor, the bank receiving them does business, and that, too, 
of a responsible character, without any recompense whatever. If 
it protests the unpaid collections, it will sometimes receive from the 
senders complaints for so doing and a refusal to remit the fees. 

Many banks have taken the ground that they will not do any of 
this sort of business which I have been describing. They mail back 
to the remitters their collections without attempting to collect them ; 
and, as they come from points where there are home banks, ready 
to do any fair collection business, there seems no particular hardship 
in this, since the owners of the collections can take them to these 
home banks and there deposit them for collection. 

The action I have last named is the only positive remedy for what 
is getting to be a great bother with many of our city banks, since 
they receive in almost every mail batches of these little irresponsible 
collections. 

But, if they are not quite ready to take such decided action as 
to return them, the hints I have given may lead to the exercise of a 
little more care and discrimination in doing this sort of business. 

There is no better way for emphasizing still more strongly this 
important point in practical banking than by presenting an incident 
from real life in banking which bears directly upon the business. We 
omit only the real names which figured in the case : 

The "Rhodes National Bank," of New York, received for collection 
from John Jones, of Boulder, Colorado, a check upon the Twelfth 
National Bank, of New York, for $1,000. This check came with a 



100 PRACTICAL BANKING. 

request for the immediate remittance of the proceeds. It bore upon 
its back several apparently regular endorsements, the first of whom was 
the payee of the check and the last John Jones, of Boulder, who had 
endorsed it over for collection to the Rhodes National Bank. The 
Rhodes National Bank collected the check, and, after making a 
deduction of 75 cents for doing the business, remitted the proceeds to 
Mr. Jones, of Boulder. So far so good. But two months after came a 
surprise. The collected check had, within that time, got around home 
to the drawer, and had then been brought, for the first time, face to face 
with a party to whom the payee had endorsed it over in remitting it to 
him by mail. This last party had never received the check. It had 
been stolen from the mail, his endorsement forged, and the check passed 
off upon a forged endorsement, cashed by John Jones, of Boulder, 
who had, as described, and in due course, forwarded it to the Rhodes 
National Bank for collection and remittance. The surprise named 
was a call upon the Rhodes National Bank by the last endorser to 
refund the money because it had collected the check upon a forged 
endorsement. The bank immediately fell back upon the stranger, 
John Jones, but within the two months that had elapsed he had made a 
bad failure and little or nothing could be obtained from him. He had 
cashed the check for the forger, who had disappeared, and, though 
innocent himself in the transaction, could help the Rhodes National 
Bank but little in the matter. The bank at once determined it would 
never again attempt to do a collecting business for an entire stranger — 
a tramp correspondent of whose responsibility it knew nothing. 
COLLECTION PROFITS AND EXPENSES-OLD AND NEW SYSTEMS- 

In old times — say thirty or forty years ago — under old State banking 
laws, and old-fashioned methods and machinery of doing a collection 
business, each bank was in the habit of selecting its collection agents, 
sending them by mail their collection paper, charging their customers 
very substantial rates upon all such paper, and passing the same to 
their credit when collected, and not one moment before, and after 
deducting from each item the heavy exchange charge. I was long 
brought very closely in contact with business of this sort, as it was 
done by a bank which had the largest collection business of any in the 
United States; and I can remember very vividly just "how we did 
it." I have in my eye now our great sheet, on which we had arranged 
the tariff of collection charges for all points, far and near, in the 
United States and Canadas. Nothing on that schedule below i$, even 
for the closest home points, while f and 1$ were very common charges 
where the paper was not payable in our immediate vicinity. Bat, 
when we came to notes and drafts due all the way from 500 to 1,500 
miles away, in certain conditions of the exchange market, 2 and 3 r r 
would crop out as an exchange charge. 

On any discounted paper which was not payable "in town,'' the 
charges for exchange were large ; and the exchange item on the books 



THE COLLECTION DEPARTMENT AND MESSENGER. 101 

of the bank was always sure to put in a very handsome contribution 
to the net earnings account when the semi-annual dividends were being 
figured for. 

But, in those times, there was a comparatively small amount of 
this collection business to be done. 

The country merchant paid his city bills by getting checks on the 
city from his nearest bank, for which he paid roundly, or by sending 
the cash. 

Nowadays no country trader, no matter whether he is located in 
Deadwood or St. Augustine, thinks he is in fashion, unless he "pays" 
his New York or Boston bills by sending there his individual checks 
on his local bank, which gets all the advantage of his deposit till the 
checks come round for collection from the city banks, which have 
given their dealers immediate credit for them, and made no charge 
for their collection. 

The establishment of the National bank system has played its part 
in this enormous increase in number and variety of the checks which 
are to be handled and collected by the city banks by increasing the 
public estimation at distant points of hundreds of small interior banks 
whose stability and character are generally guaranteed by the ' ' Na- 
tional " part of their title. 

And this very feature of confidence in such banks has added largely 
to the ease of collecting such checks. 

There is also in our favor at the present time the very marked 
increase in the material facilities for correspondence and travel. 

We now have banks in all places of much business. We have 
express trains in place of the old-time coaches, and we have mail facili- 
ties that are far in advance of those of former days. 

Then we have the great express companies, for the leading express 
companies of the country and many of the small ones are managed 
with a skill and a system which command not only admiration but a 
very large patronage from bankers. There was a banking period 
when the express system was not in existence. In those days of a 
smaller breadth of banking than at present the banks somehow existed 
without the express companies, but it is now hard to see how they 
managed to do without them. Into towns and villages where there are 
no banks or bankers, and even no lawyers or notaries, the ubiquitous 
express companies now stretch their lines of connection and in such 
places do for the banks with skill, promptness and safety a collection 
business which it would be almost impossible for them to have done in 
any other way. Some banks are so much in favor of express companies 
as collecting agents that they even employ them freely in the work of 
making collections in cities and towns which are supplied with banks. 
This they do because they believe the express to be often the quickest 
and cheapest. 

The details of the work have been brought into very modern and 



102 PRACTICAL BANKING. 

practical shape by a deal of experimenting in the way of shortening 
and improving records and forms. 

Any banker of long experience can easily recall the days when stamp 
machines for endorsing collection paper were unknown. 

The bank officer of to-day with experience of the days when the pen 
did all, thinks with weariness of the time when as Corresponding or 
Collection-Clerk he was obliged to go through the drudgery of writing 
all the payable-to-order forms on the back of the paper he sent away 
for collection. 

Now, the flexible hand-stamp, of most useful and cunning construc- 
tion, is made by Messengers and junior clerks to do the work that was 
only done in former times by the pen of the bank officers who ran the 
Collection and Correspondence Departments. 

I take the opportunity to insert a few forms which may be helpful 
and suggestive. 

To save even the slight work of filling in the name of a payee 
Cashier, where small collections are to be scattered widely among cor- 
responding banks, a form of endorsement of this type may be allowed : 

PAY ANY NATIONAL BANK 

or order, for collection for account of 

THIRD NAT. BANK, TROY, N. Y. 

John P. Henry, Cashier. 

The safety and sense of this endorsement lie in the fact that there 

is little danger of making a check, forwarded for collection, payable to 

" any National bank," since "any National bank" may be presumed 

to be a safe correspondent. If by chance the paper so endorsed should 

fall into the wrong bank such a mistake would lead to no trouble, 

since the wrong bank would be only too glad to pass it along to the 

right one or promptly account for its proceeds. 

There has sometimes been a question whether unmatured collection 
paper in the hands of a failed bank might not be covered into its 
assets by creditors of the suspended institution. 

For this reason, whether the order be general as above, or definite 
as below, the phraseology of the second line is almost universally in 
use among our best-managed banks, as expressly limiting the owner- 
ship and interest of the bank to which it has been sent : 

Pay MERCHANTS NATIONAL BANK, 

N. Y,, or order, for collection for account of 

FIRST NATIONAL BANK, of Denver. 

C. B. COULD, Cashier. 

A simple and concise form of a common remittance endorsement 

which cannot be improved is simply 

Pay to the order of JOHN BRADFORD, Cashier. 
THOS. JONES, Cashier. 
In many country banks the Cashier does the entire work of the 
institution — opening the bank in the morning, discharging the duties 
of Book-keeper, Teller and Collection Clerk during the day, and shutting 



THE COLLECTION DEPARTMENT AND MESSENGER. 103 

up at night. Bankers who are thus crowded with hard work soon learn 
to perform every branch of their labors in the easiest manner. They 
use all the short-hand processes that are available and endeavor to 
mark out new quick cuts to desired results. In illustration of this 
point take the following cunningly-devised form of a letter of a country- 
bank (see Form 20) for returning unpaid collections to its corres- 
pondents. This letter inclosed, as will be seen by the record, an 
unpaid draft, to which the drawee had replied that he would "write 
the drawer." The table of "excuses" is certainly a comprehensive; 
and ingenious one: 



FIRST NATIONAL BANK, 


So-atliamptoin.;, 02n.±o_ 


1 


C?£^^^d/ yy, 189O 

Cyd't'&d'. returned herewith. 


&tl%sn<l draft on C/Hl^U^d 


Reasons for refusal checked below. 




Express charges cents, which pi 


ease remit. S. A. MAY, Cashier. 


Payment refused, no reason given. 


Claims credit for goods retd. 


Acceptance " " '' " 


Wants extension of time. 


Notice given, but no response. 


Account not due. 


Failed. 


Never accepts drafts. 


Closed up. 


Cannot pay at present. 


Not in town. 


Does not owe this. 


Parties cannot be found. 


Has paid bill. 


Refuses to pay exchange. 


Should be less freight. 


Amount not correct. 


Draft not according to agreement. 


Goods not received. 


Will send check. 


Goods not satisfactory. 


X Party will write. 


Goods returned. 


Parties have written. 



Form 20. 

Under the pressure of the increased business and the competition 
between themselves, the banks in the central cities find it necessary to 
make all kinds of collection contracts with banks at other central 
points and all over the country. These contracts may be very simple, 
perhaps only a reciprocal account, when each will send and charge- 
directly to the other all cash items due at their respective locations, 
and give correspondingly quick credit for all items of a similar descrip- 
tion received. 

But arrangements of this simple nature can only exist, usually,, 
between a few banks at the larger points, and a much more common: 
form of contract is that between a city bank and some centrallv 
located bank in a neighboring State, by which the latter covers for 
the former all of its State, or even a larger section, and remits periodi- 
cally, perhaps once a week, or once in two weeks, without any charge, 
for all its collections up to that date. It would be almost impossible 



104 PRACTICAL BANKING. 

to mention the great variety of terms which are found in these different 
collection contracts, and which grow out of the desire of each bank to 
conduct its collection business by the best system, and at the least 
possible expense and the minimum of work, responsibility and delay. 

I must mention one bad feature which seems to be on the increase. 
I have seen that some banks send their collection paper to the points 
where it is payable over routes not only far from direct but so 
extremely circuitous as to throw upon the senders a responsibility for 
not exercising diligence in case of non-payment and return of the paper. 
Interior banks are constantly competing for the Clearing-House city 
banks' work of collection and they sometimes contract to make collec- 
tions for districts so wide as to embrace many points far out of any line 
in which they might naturally form the connection between the bank 
for which they are collecting and the point of payment of the paper 
received. Banks should be very cautious about entering into wholesale 
collection arrangements which have this element of danger and are so 
unbusiness-like in their character. Where the paper handled is small 
the work may run along without much risk, but a day will come when 
a check or draft for a large amount may linger so long on its collection 
travels as to take on an alarming aspect if after many days it returns 
dishonored to its owners. There is little need of giving any pointed 
illustrations of the objectionable workings of these around-the-horn 
methods of making collections. Every banker almost daily observes 
the absurdity of some collection trades of this description which have 
been made by one bank or another. Not infrequently a bank in a 
central city finds collections which it has sent to a bank in another 
State i o be collected coming back again through some third bank to be 
placed once more in its collection line under some other wholesale 
arrangement. A note of caution in regard to this matter should be all 
that is needed. 

Let me speak also of what I will style & point of honor. 

Banks are expected to be exceedingly systematic and correct in the 
administration of their internal affairs. When a customer goes to a 
bank with a suggestion that there has possibly been an error in its 
interest computations, notices sent out, or some other thing, he often 
hedges against what he fears may have been his own error by venturing 
the polite remark, ' ' The banks are always right, so I suppose I must 
be wrong. " Banks should be correct standards in matters belonging 
to a higher range of duties than the management of the internal details. 
They should be just and honorable in their dealings with the public 
and with other banks. 

To illustrate : 

I have named as the most common forms of collection arrangement 
those in which the country bank makes the collections over a large 
district at par, remitting for the same once a week or once in ten days, 
or something of that sort, depending for its remuneration upon the 



THE COLLECTION DEPARTMENT AND MESSENGKER. 105 

average balance which the business will under this plan yield. So far 
so good. The collections in this instance may be supposed to range in 
amount from checks or drafts of $10 to those of $1,000 or more. But 
when some deposit transaction leaves on the hands of the city bank a 
draft of, say, $25,000, payable at a handy point in the State alluded to, 
in such a case the duty of the city bank would be, of course, to send it 
for collection to the correspondent with whom it has made the arrange- 
ment referred to. If it does not do this and sends this large collection 
to some other bank in the locality where the draft is made payable for 
the purpose of getting, on account of its size, a cheaper collection rate 
than it would receive from its regular correspondent, it violates both 
the letter and the spirit of a contract which it has deliberately made 
and commits an act which is decidedly reprehensible. The proper 
way of action under the circumstances would be for the city bank to 
do as it had agreed — send the large check to its regular correspondent, 
simply calling attention to its unusual size and asking on that account 
for as early a remittance of its proceeds as the collecting bank may 
deem just and equitable in view of the fact that the periodical remit- 
tance arrangement was not based on the expectation of such large 
transactions. 

A most useful record is a carefully-indexed book, containing a full 
record of all the collection arrangements the bank has in force with the 
various correspondents to whom it is in the habit of sending paper for 
collection and remittance. Thus, for instance, it may be desirable to 
know, on the instant, what sort of a collection trade the bank has 
negotiated with its corresponding bank in Worcester. An immediate 
reference is made to the letter "Win the indexed manual, which may 
read as follows : ' ' Worcester remits at par three times a month : reaches 
us 5th, 15th, and 25th. " This statement, in abstract, is easily under- 
stood by any bank man. Useful information may be incorporated into 
this handy book in regard to collection prices. There are hosts of 
points in all parts of the United States to which National and other 
banks doing a large collection business are constantly forwarding, 
for collection, notes, drafts and checks. With these points they have 
no fixed collection arrangements. In sending paper to correspondents 
of this class the sending bank turns to its banker's almanac, selects 
what it believes to be the best bank at the given point — the bank, 
perhaps, having the largest capital and surplus — and to that bank 
sends the paper, trusting that it will collect it promptly and at a 
reasonable price. A condensed record of its experiences with these 
"casuals" should be made in the lettered collection vade mecum 
described, so that the cost of getting home the funds may be quickly 
arrived at in any f uture time when paper payable at that point may be 
offered for collection or discount. 

So far I have considered the matter of collections just as it stands 
to-day, but with the exception of minor changes and savings, the 



106 PRACTICAL BANKING. 

banks are just about where they were thirty years ago. Each city 
bank manages its country collection business on its own separate and 
independent basis. It makes, as far as practicable, its own special 
collection trades, which, as I have said, are of about every imaginable 
character. One country bank agrees to remit once a week or twice a 
week, once a month or twice a month, at par. Another bank prefers 
to take off a little something as an exchange charge, and remit at 
once, at par. Another agrees to collect upon the understanding that 
the bank sending collections shall keep a certain permanent balance 
with them. 

The trades are well enough in themselves, but what should be done 
in these large places is this : All the banks in one of these places should 
combine in the selection of one of their number to do the collecting 
for all. 

As the Boston banks have looked into this matter somewhat let us 
see what they found : 

Very few are aware of the magnitude of the business of collecting 
checks on interior New England banks that is now done by the Boston 
banks, or the rapidity with which this work, which, in many instances, 
is work done for nothing, at one's own expense, is, and has been, 
increasing. In an able report, drawn up in 1877 by Mr. George Ripley, 
President of the Hide & Leather Bank, it was stated that the out- 
standing balances of the Boston banks on account of country collections 
amounted to $2,100,000; and the yearly expense of making these col- 
lections was then estimated at $229,000. The annual cost of this 
business at the present time has been set down at about $400,000, ^nd 
the outstanding amount of the Boston banks' uncollected checks now 
foots up over $4,000,000. This is the situation. 

Now, what can be done in the premises to improve these collection 
matters ? We have before us a valuable report of a committee appointed 
by the Boston Clearing-House Association to consider the subject of 
New England collections, which presents for the consideration and 
acceptance of the banks a plan which is one answer to the question 
raised. The plan of this intelligent and experienced committee looks to 
the establishment of an agency in many respects quite like the present 
Clearing-House, which shall have no capital, and which shall nomin- 
ally make no charge for its services, but whose expense shall be borne 
by the banks in proportion to the business done. 

Without entering into detailed explanation or discussion of the 
methods and machinery proposed by this committee, we propose to 
present what may possibly appear a more practicable and more econom- 
ical scheme for doing by the wholesale this country bank collection 
business, which the banks of Boston are now doing in a retail way, 
under many disadvantages and at large expense. 

In 1824 the banks of Boston found themselves encumbered with the 
labor, risk and expense of sending home for redemption those country 



THE COLLECTION DEPARTMENT AND MESSENGER. 10? 

bills of New England banks with which the city was flooded. After 
enduring for a time the retail method of attending to this work, they 
finally hit upon the wholesale idea, and inaugurated the Suffolk Bank 
system, the methods, machinery and complete success of which are so 
familiar to our bankers. 

And, as to-day the situation of the Boston banks in the matter of 
country check collections is relatively the same as it was sixty years 
ago, when they had on their hands the problem of country bill redemp- 
tion, let them adopt the same sort of remedy. 

Instead of organizing an independent agency for doing the work 
in hand, let them contract with some one of their number to take 
on the business. Any well-managed city bank will find little difficulty 
in the work of simply extending its collection department by putting 
on a good staff of corresponding and assistant Collection-Clerks, and 
of assuming the entire country collection business of all its neighbor 
banks. It has now in full operation all the methods and machinery- 
for transacting this larger work; all that is needed is an increase of 
power. If it takes on the country collection business of its neighbors, 
it will only have to make its regular collection letters longer and 
larger. And the larger business will enable this wholesale collection 
bank to make better terms with corresponding banks in the country, 
while corresponding banks will also reap very evident advantages from 
the concentration and centralization proposed. Seventeen hundred 
collection letters are to-day sent out from the Boston banks every 
twenty-four hours, although there are only 277 towns in New England 
which have National banks. Two hundred and seventy-seven daily 
letters would do all the business under the plan proposed, at a saving 
of 1,400 daily letters. 

The economy of the plan we have suggested must be very evident, 
since, in addition to the saving in the matter of clerk hire, postage, 
stationery, etc. , there would be a saving in the point of expense of the 
execuiive management of the business, a department which, under the 
plan proposed by the Clearing-House Committee, would of necessity 
be costly. 

There would, in fact, be no question about the economic advantages 
of the plan of giving the collection business to some established bank ; 
since such a bank is already in possession of the "plant" necessary for 
the transaction of such business, and could make money out of it, 
with a charge for exchange which would not support an independent 
Clearing-House. 

We do, of course, expect to hear it said that our ' ' ideal plan " is all 
very well, but that we cannot find any bank ready to take the labor 
and responsibilities of collecting all the country checks for all the 
Boston banks; but we are by no means sure of this, and believe in 
a vigorous hunt for such an institution, and what we say of Boston 
we mean should apply as well to other large cities. In New York., 



108 PRACTICAL BANKING. 

Chicago, Philadelphia and dozens of smaller places the plan is just 
as practicable as in Boston. 

As regards the risks of the business, all that can be expected of any 
collecting bank in city or country, or any collecting Clearing-House, is 
that they will consider themselves responsible for the exercise of due 
■care and diligence in the matter. The individual banks sending in the 
collections, or the individual owners of the checks who deposit them, 
will, under any system of collection, have to bear the risks that are in 
addition to those we have named. 

There are many incidental points of advantage in the wholesale 
system of collection advocated by us and by the Clearing-House com- 
mittee which might be pointed out, had we space. We have only time to 
note one of these : In case of large aggregates of collections on central 
points, it might be advantageous for the city collecting bank to despatch 
special messengers, who should draw such checks at the counters of the 
banks upon which they are made, returning by evening express trains 
with their heavy invoices of city funds ready for the ensuing day's 
clearing. 

We have often heard the late Jeffrey Richardson tell how, in the 
early days of the Suffolk system, he and the late William Lawrence had 
taken a carriage and pair, loaded up with country bank bills, which were 
to be redeemed, put aboard some pistols, and driven to Newburyport, 
Portsmouth, etc. , fetching up at Groton at Mr. Lawrence's old home, 
and finally making State street. To-day there are many interior 
central points in New England which could be reached for collection 
purposes after morning deposits in Boston, and which could give 
returns in season for next morning's clearing. 



THE BANKS' NOTARY AND PROTESTING. 109 



CHAPTER VI. 

THE BANKS' NOTARY AND PROTESTING. 

In notarial business there are some points of interest which may not 
be known and understood by all. Any one can protest a dishonored 
demand. I can remember well when it was the custom of some banks 
to do their own protesting — do it through their own uncommissioned 
officers. 

Records of presentation and refusal of payment would be formally 
made on a bank book, kept for the purpose, by the clerks of the bank, 
and the paper, if it was of the collection class, duly returned to its 
owners, with a statement of what had been done, in the way of demand 
and notification. These record books went into Courts, when suits 
demanded them, and they had good standing there. I have at hand 
one of these old style protest books. And even in these days, such a 
book, and such a method, have their places. 

I sometimes receive circulars from National banks in Southern and 
Western States, asking for collection patronage, which say, among 
other things, that they cannot undertake to guarantee protests of 
dishonored paper, which has been made payable in places which have 
no notaries public. But these banks should bear in mind that the next 
best thing to a regular commissioned Notary is a " layman," who has 
intelligence enough to serve as a Notary — to make a demand, notifica- 
tions, and a record, as I have described to have been an old-time custom. 

Of course all banks understand what are the conspicuous advantages 
of a regularly commissioned, and sworn, Notary, with a big seal, formid- 
able blanks, and a deal of experience in his work. His seal has a right 
of way in Courts which is not accorded to unprofessional work in the 
same line. Nothing can go behind it ; there is no need of collateral 
testimony, witnesses, etc., to support it. The seal and the record, if 
the work is done as it should be, stand firm without aid of other support. 

Never fail to employ notaries to do notarial work, when notaries can 
be reached. 

The notaries public of our banks are, as a class, skilful, intelligent, 
and faithful men, who are fully aware of the responsibility and delicacy 
of their work, thoroughly acquainted with the laws and customs that 
rule their trade, and also men of courtesy and judgment, for they have 
many missions of a delicate and annoying character. 

They hold a commission which is of very ancient origin, and under 
which, in some ages, very important and curious work has been done, 



110 PRACTICAL BANKING. 

that is to-day altogether out of the notarial sphere of action. The 
trade is of Roman birth. 

In Roman days the Notarie were so called from notae, or short-hand 
characters, in which they took down depositions, and minuted instru- 
ments. The notaries were not then, as now, public characters. 

From Roman times to the present, notaries have been a recognized 
"institution" in all civilized lands. In France they have, to-day, a 
qualified judicial character. In Germany, they are almost always 
employed to make wills, frame appeals and draw contracts. In England, 
where, until quite recently, they held their appointments under the 
Church — receiving their commissions from the Archbishop of Canter- 
bury —they administer oaths and affirmations, draw deeds, and attest 
instruments of a great variety of description. 

' ' Go with me to a Notary and seal me there your single bond, " says 
Shylock, that old note-shaver. 

In the United States, the Notary's best hold is protesting unpaid 
paper. Sometimes the bank's notarial work is done by its solicitor. 

But whether lawyers or " laymen," they ought, in order to do their 
work properly and with safety to themselves and their bank, to be 
thoroughly conversant with all the laws and customs relative to notes 
and bills — to know all about the rights and duties of all the parties to 
the paper they handle. 

There seems little excuse, in these days, for the enquiring Notary, 
or bank officer, to be long deficient in any of these points, for thorough 
and concise manuals relative to these matters abound on every hand, 
and should be in every bank and notarial library. 

The bank should never hand to its Notary for protest any piece of 
paper until it has made doubly sure that its non-payment has not been 
brought about by some error of the bank ; and the Notary should not 
do the final work of protesting till he has given parties to the unpaid 
paper reasonable opportunities to correct errors that have been made 
by themselves, or some one else, which have led to the temporary 
dishonor of the paper. 

And it seems to me that the Notary who spends his time, after bank 
hours, in running around after promisors, acceptors, etc., who have not 
paid their maturing paper, and who finally gets its face, but is minus 
notary's fees, ought to be compensated by some one. Common sense 
would suggest that that some one should be the party whose error has 
led to the non-payment of the paper at the proper time and place — at 
the bank before close of banking hours. 

Of course where a Notary is doing a heavy protesting business he 
can afford occasionally to make such a collection without receiving a 
fee but the unpaid cases should be the exceptions. 

There is a quite wide-spread impression among business men — 
especially among parties who have had to pay many protests on 
paper which might just as well as not have been avoided had they 



THE BANKS' NOTARY AND PROTESTING. Ill 

paid proper attention to their business, that the work of a Notary is 
light, heavily paid and quite devoid of risks and responsibilities. This 
is far from being the case. 

The notarial profession, like all others, has its shady side — its 
especial cares, responsibilities and labors which are only known to the 
experienced. 

Many of our best notaries feel a deep anxiety about their work and 
hold that it is by no means overpaid. Then transactions, of which the 
law requires they shall keep a full and accurate record, are sometimes 
the basis of sharp legal contests, and in person and by book they are 
often summoned to the witness stand. 

I have known faithful notaries, who have been very much burdened 
by their duties, so annoyed and badgered by suits for alleged mistakes 
in the discharge of their work, and by other causes, as to be anxious 
to get out of the business. 
RESPONSIBILITY OF BANKS FOR THE WORK OF THEIR NOTARIES. 

There is a question of interest relative to the connection between 
the banks and the notaries public whom they use which should be 
discussed here. 

If the Notary to whom the bank has delegated these very important 
and delicate duties makes an error in his work — if for instance, in 
protesting a note for a bank, he fails to make the proper demand upon 
the promisor, or neglects to notify the endorsers as they should be 
notified, and, through errors of this nature, brings loss upon the owners 
of the dishonored paper — he would certainly be held primarily 
responsible for such loss. 

The important question we have in view is whether or not the bank 
which has delegated to him these duties can be held responsible in case 
the Notary has, by his action, incurred losses which he is himself 
unable to make good. This is a point which has not been legally 
settled. There are no decisions on record covering such cases. 

To avoid risk, it is certainly desirable that this agent should be of 
some financial responsibility, in addition to his other qualifications. 

Our own opinion, however, is, that as the Notary Public is a State 
official, a sworn and independent officer, receiving his commission 
directly from the Governor, he is thus rendered solely and independ- 
ently accountable for the results of the work which he performs in his 
official character. The fact that he has been specially designated by 
a bank to perform for it this notarial work does not throw upon that 
bank any accountability for his work. He is not really the agent for 
the bank, and is not so viewed from a legal standpoint, but he is an 
employee of the Commonwealth, doing for the bank a duty which it 
cannot itself perform or empower any one but such an officer to do 
with the same effect. Banks are certainly responsible for agents whom 
they have appointed, but they are not responsible for work done by 
officers in whose selection for the work they had no hand, and whose 



112 PRACTICAL BANKING. 

duties and liabilities are specifically described in the statutes of the 
State appointing them. 

This very important and intricate question might assume a far 
different aspect if the Notary were a clerk of the bank for which he 
was acting as Notary. 

There are no legal obstructions, either in the National Bank Act 
or in the statutes of any State, to the assumption of notarial work 
by bank employees of any class, and officers of banks quite frequently 
hold notarial commissions. But it is certainly an open question whether 
such a combination of duties is to be recommended for work of this 
delicate and responsible character. 

It has been urged, with no little degree of reason, that where a 
bank officer serves as Notary all the responsibility and risk of which 
we have spoken might, through that one fact, attach to the bank of 
which he was a clerk. 

In the matter of the delicacy of their professional duties, it may be 

well to remember that there have been cases where the charge has 

been made against bank-officer Notaries that they have been unduly 

willing to protest paper which, by error and f orgetf ulness, has been left 

unpaid on the hands of their bank, when a little extra pains on their 

part, as bank officers, would have kept the paper out of their hands as 

Bank-Notaries. 

PROTESTING. 

In taking in collection paper, clear instructions should be obtained 
from its owners as to whether or not it should be protested in case of 
non-payment. 

It by no means follows that a formal protest is not desired because 
the paper bears no endorsements. Many banks make it a rule to 
protest all unpaid paper unless otherwise ordered, and I think the rule 
a good one. 

No dishonored paper should be passed into the hands of the Notary 
by the Tellers, or any subordinate officers of the bank, until it has 
been shown to the Cashier of the bank. Protesting is a disagreeable 
last recourse, and before taking this step the bank must carefully 
assure itself that it has discharged 'every previous duty to the paper, 
and that there are no mistakes hanging over and about it. By this 
course much ill feeling, suits for damages, and loss of money by the 
bank, may often be avoided. Every officer of a bank and every man 
issuing paper should know the leading points relative to the rights and 
duties of promisors, endorsers, acceptors and drawers of paper, and 
there are plenty of books at hand which will post him up in these 
points. 

Below is given in detail a legal point or two that belongs to this 
question of protesting : 

The law in regard to protest (taking the word in its strict sense as the act of a 
Notary Public) is as follows : 

Protest must be made of foreign bills. The only exception is where it has been 



THE BANKS' NOTARY AND PROTESTING. 11%' 

waived by the party sought to be charged, or where, through peculiar circum- 
stances, protest is impossible, e. g., where no notary can be procured. 

Protest, though customary, need not be made in the case of inland bills or of 
promissory notes. At common law the Notary's certificate is not even admissible in 
evidence in such cases. But, in Massachusetts, by statute, the certificate is made 
admissible and prima facie evidence of the facts stated, in case of all bills, notes andi 
orders. The States of the Union are foreign to each other in this respect. 

As the liability of the endorser or drawer must, in general, be fixed according to> 
the laws of the State or country where the dishonor occurs, it should be noticed, as a. 
possibility, that some States may have passed statutes modifying the common law, by 
requiring the protest of inland bills and promissory notes. But this is- not very- 
probable. 

In the matter of protesting sight drafts in States where grace is; 
allowed, there is a point of interest which may not be understood by 
all bankers. It is this : 

Where these sight drafts are received for collection, it is not always; 
clearly incumbent upon collecting agents to protest such drafts for 
both non-accptance and non-payment in cases where there is a refusal 
to honor the paper. 

If it seems clear that there is no possible chance of the ultimate 
payment of the draft — if the drawee declares positively that he shall 
have nothing to do with it — simply extend upon it a protest for non- 
acceptance, and return it. 

Where a maturing note is payable at a particular point — at some 
specially-named bank, for instance — the law requires that it must be 
there presented before it can be protested, and within hours when it is. 
customary for some person competent to answer demands for payment 
to be present. It is not positively necessary that the demand should, 
be made during what are considered the regular business hours of the 
office where the paper is payable. The bank may. for instance, close 
at 2 o'clock, but if its responsible officers, who are competent to respond 
on a demand of this character, are in the habit of being there until & 
o'clock, a demand upon them may be made up to that hour. 

While I have advised that all protesting be done by a Notary I have- 
said that under some circumstances ' ' protest " may be effectually made 
by persons holding no notarial commission, and many of our interior 
banks have a habit of treating a portion of their endorsed unpaid 
paper, in cases where it is their own'property, in this way. If they are 
quite confident that the paper will be ultimately paid by some of the 
parties to it — that it has simply been forgotten, or something of that, 
sort, and that there is, at any rate, no prospect of any future contest, 
over it — they simply make upon their own books a record of its demand*, 
and dishonor, and also a record of the sending out of notices to» 
endorsers — notices sent by themselves. 

The express companies have to act on this principle in some of their 
collection business. They dislike to take collections on points where 
there are no notaries. Some of them even endeavor to decline business 
of that class. Yet if pressed they will generally give way, for they are 
prepared to get along with their non-payments without a Notary by the. 



114 PRACTICAL BANKIXG. 

following letter of instruction (see Form 21), intelligently drawn up 
by one of the largest Express Companies : 



EXPRESS COMPANY. 

NOTICE TO AGENTS. 

The collection that accompanies this is due and must be presented to 

on that day for payment, and if not paid 

MUST BE PROTESTED. 
In order to have this done you will hand it to a Notary Public, or, if there is no 
Notary Public in your town or vicinity, present it to a Justice of the Peace or 
Magistrate for that purpose. In case there is no Notary Public or Justice of the 
Peace in your vicinity, you must make the demand for the payment— this should be 
donein presence of a witness— and, if not paid, you must immediately notifyby mail 
each endorser that demand has been made and payment has been refused and that 
the holder looks to him for payment. This notice must be sent by the first mail after 
the demand has been made, and you must be prepared to prove, on your oath, the 
date and time of making the demand and of mailing the notices. To assist you in 
doing this you had better make some memorandum of it at the time. In case you 
are not furnished with the address of the endorsers you should write the notices to 
the endorsers and inclose them to the Agent at the office from which the collection 
was sent. It will be his duty to mail the notices to the proper address at once. 

Unless it is protested on the day it is due the endorsers will be relieved and the 
Express Company will be made liable. 

(Signed,) , Manager and Sup't. 

(Form 21.) 
PROTESTING LOST AND MISLAID PAPER. 
The exercise of due care, and the existence of a proper system in the 
administering of the internal affairs of a bank, will reduce accidents 
hinted at in this heading to the mi n imum. I have, elsewhere in these 
pages, pointed out the many ways in which losses of papers in banks 
and by banks, in the transaction of their inside and outside work, may 
be avoided. But let bank officers be as careful as they may, they will, 
now and then, lose and mislay notes, drafts and checks. These will 
sometimes disappear in the most unaccountable manner. Sometimes 
the lost papers will suddenly reappear, and quite commonly when their 
usefulness has long come to an end. They will turn up in overlooked 
corners, in books into whose leaves they have by accident been shut, 
will come back from points to which they have by accident been sent, 
and, in other ways, will come home when they can do no good, to 
illustrate by their career the total depravity of inanimate things. 

When checks, drafts, notes, etc. , are, to all appearances, lost beyond 
all hope or possibility of an early recovery, the careful banker is at once 
on the alert to do several things, which, in his eyes, appear absolutely 
necessary. 

Papers which are safe enough when in the right hands may become 
sources of danger in wrong hands. Where these valuable papers have 
disappeared, as described, their payment must be duly stopped, at all 
their natural paying points, by the most careful and formal notices. 
All the parties to the papers must, if possible, have early notice of the 
loss; and, in many instances, the banks which have lost the papers 
assume a dangerous responsibility, if they do not, at once, advertise 



THE BANKS' NOTARY AND PROTESTING. 115 

their loss — a responsibility to innocent parties who may unwittingly 
negotiate the lost paper. 

I have known many instances where banks have suddenly found 
missing — or have missed finding — paper which was maturing on their 
hands and which must be collected or protested, since there were 
endorsers to be held by due demand and notice through formal protest 
by Notaries. 

Such a situation emphasizes that necessity, of which I have in 
another place spoken, that a bank should see to it that, as far as prac- 
ticable, it has on its record books, covers, etc., a full descriptive record 
of all paper that it holds for discount, or has taken on for collection, 
and that it does not depend upon the chances of some one else, who 
has an interest in the paper, having this story at hand. 

For, if a bank has, right at hand, a full description of the missing 
notes, drafts, or other documents, it can make demands, receive pay- 
ments, and protest, and send notices of dishonor to all parties to the 
papers in an effective manner. 

PROTESTING A JOINT NOTE. 

The bank had for collection an endorsed note whose promisors, in a 
joint capacity, were two individuals, one residing in the place where 
the bank was located an.d the other living and doing business in a 
distant city. This note was not written payable at any particular 
point, and the day of maturity arrived without payment. It must now 
be protested, and the question arose as to the way this should be done, 
and how demand should be made and notices sent to firmly hold the 
endorsers. 

It was evident enough that it should have been made payable at 
some special point, but it had not been so framed, and what, under the 
circumstances, must be done with it ? The course taken was the only 
safe one. A demand was made at once upon the promisor in the place 
where the note was held, and notices of his dishonor of the paper sent 
to the endorsers. Subsequently the unpaid note was forwarded to the 
city where the other promisor was located, a demand made upon him 
for its payment, and notices of his refusal to pay promptly sent to all 
the endorsers. There was a legal fight over the note, the endorsers 
refusing to pay on the ground that a proper demand had not been 
made on both the promisors. The decision finally reached in the case 
was that the holding bank could not have done better in the matter 
of demand and notices, and that it made the only legal protest possible. 
NOTES PAYABLE AT A BANK. 

It was a note for $5,000, bearing many endorsements. The bank 
held it for collection. At its maturity the promisor went to the bank 
in person and said he could not pay the note, that he had suspended 
payment, and that there would not be the slightest use in taking the 
trouble to present the paper at the somewhat out-of-the-way bank where 



116 PRACTICAL BANKING. 

it was written payable. The note was duly given to a Notary to protest, 
and he was told that the bank had made a personal demand upon the 
promisor and that the promisor had positively refused to pay it. 

The over-zealous Notary followed the somewhat risky and unusual 
course of making out his protest and notifying the endorsers without 
making a demand for the payment of the note at the bank where it was 
made payable. 

A lawsuit over this method of protest was the result, the endorsers 
taking the ground that they were released because the proper demand 
had not been made upon the promisor. The Court held that the 
endorsers must pay ; that as the note would not have been paid if it 
had been presented at the bank where it was made payable, and pay- 
ment had been personally demanded from the promisor, who had 
assured the holders that it would not be paid by him under any cir- 
cumstances, there was no loss to the endorsers through the alleged 
neglect of the Notary, and that they had not in any way been placed 
at a disadvantage by his course in the matter. 

The action taken in this case by the collecting bank and its Notary 

is not by any means one to be recommended, yet, endorsers of paper 

should be taught by its results that the law does not permit them to 

evade responsibility when equity, justice and common sense is against 

them. 

NO RESIDENCE NOR PLACE OP BUSINESS. 

The man bought a four months' note, given for a thousand dollars, 
not made payable at any particular place. It bore the endorsement 
of several good parties, whose places of business or residence were 
well-known to the owner of the note ; but, as for the promisor, neither 
the holder of the note, its endorsers, nor any one else who was 
acquainted with him accessible, had any knowledge of his wherea- 
bouts. In fact, this signer of the paper had no regular place of busi- 
ness nor known residence. 

The paper remained unpaid at maturity, and the holder being 
unable, for the reasons we have given, to make any formal demand upon 
the promisor, did not attempt to protest it. He promptly informed the 
endorsers of the note that it had not been paid, but did not himself, 
or by the hands of a Notary, make any record of a demand upon 
the promisor on the day of the maturity of the paper. The endorsers 
took exceptions to his course, and refused to pay on the ground that 
the holder of the paper had, by his negligence, legally released them. 
In the legal contention that followed the decision was reached that 
where a promisor has no known location there is no absolute need of a 
protest to hold endorsers. Though such may now be the law, a far 
better course of action in cases similar to the one we are describing, 
would be for the holder of the unpaid note to place it at once in the 
hands of a Notary, and have him, in due form, record the fact that he 
had made diligent and ineffectual search for the promisor, and send to 



THE BANKS' NOTARY AND PROTESTING. 117 

all the endorsers immediate notice of this fact and the non-payment of 
the paper. 

GETTING ACCUSTOMED TO BEING PROTESTED. 

I have spoken of the delicate, and often painful and disagreeable, 
character of that part of a Notary's labors which relates to protesting 
dishonored paper. He is often called upon to make demand and send 
notices of dishonor upon paper which is for the first time sent to protest 
— to stamp with his unwelcome seal names which have for generations 
stood high, and which have never before been placed under protest. 
At such times, and under such circumstances, the notarial officer is not 
unseldom a witness to no little mental distress and depression on the 
part of promisors who are placed in the (to them) novel position of 
being obliged to respond "No funds." 

Yet the reflections I have here indulged in are a little relieved by a 
bit of testimony in the premises, which has been given me by a Notary 
of large and long experience. He fully endorsed all I have just said 
about this matter. "Yes," said he, "I have had many and many an 
experience such as you have described. I have entered the counting- 
rooms of old and honored merchants, whose names had always stood 
unquestioned, to hear them say, for the first time, ' We cannot pay — 
we have suspended, ' in a way so despairing and sorrowful as to excite 
my deepest sympathy. But human nature is, my dear sir, wonderfully 
elastic. It would surprise you to see how quickly people of this sort 
will get reconciled to the situation ; how soon I am ahnost welcomed 
with a very cheerful and glib ' No funds ' by parties who, in my first 
calls, were well-nigh prostrated by the necessity for my presence and 
action. " 



118 PRACTICAL BANKING-. 



CHAPTER VII. 

THE DISCOUNT CLERK AND THE LOAN. 

Banks earn dividends by loaning their money — by keeping up their 
loan, and getting remunerative rates on it and by not making bad loans. 

A portion of the loans of many banks consists of investments in 
solid bonds, which require little attention, cause little anxiety, and can 
be depended upon as a reserve nearly as reliable as legal tenders, or 
gold, when panics and deep stringency causes the line of deposits to 
waver and shrink. But the bulk of the loans of our banks consists, of 
course, of commercial paper, and time and demand loans upon collat- 
erals of many descriptions. What with the demand and time paper in 
the files of the average bank of to-day, the entire loan will generally 
average due (run off) in sixty days. Thus, a bank with a couple of millions 
capital, a half million surplus, a couple of millions of deposits, that may 
be generally depended upon to stay, and a million of circulation which 
may be depended upon to stay out, has five and a half million dollars 
to keep loaned, less reserves held. And, divide this amount by sixty, 
and you have the amount which the bank managers have to invest in 
paper, etc. , each day. That is, the entire loan of four or five millions 
rolls over in sixty days, which is at the rate of about eighty thousand 
dollars or so a day. 

Now, how is this loan kept up ? In what way is this daily heavy 
investment made ? Who makes it, and what are the methods of pro- 
cedure in buying all this paper and loaning all this money on collateral ? 
In these premises methods vary in different banks, but I think the 
various ways of procedure can be easily and concisely explained. 
Keeping up the loan is mainly done, as we have indicated, by intro- 
ducing into it discounted business paper ; for properly managed banks 
generally recognize the fact that their charters were given them for the 
purpose of establishing institutions that should be, to a certain extent, 
the wings of commerce. The chief business of a Board of Directors is 
supposed to be the selection and purchase of this paper. For this 
reason it is highly desirable that every Board, in its make-up, shall 
represent all the leading branches of trade, manufacturing, etc. , in the 
district where the bank is located ; for a Board of this varied constitu- 
ency is extremely useful in discriminating in the matter of credits. 

The discount-seeking paper appearing before the Board comes from 
depositors — dealers with the bank who are understood to stand first in 
claims upon it on the ground of the value of their current, non-interest 



THE DISCOUNT CLERK AND THE LOAN. 119 

paying balances which they keep with it. Their claims resting on such 
a basis must, of course, other things being equal, be gauged or graded, 
by the size of these daily balances. 

It is also presented by outsiders — merchants, brokers, etc. , who have 
an idea that the bank is in funds to discount paper in excess of the 
regular offerings of its line of depositors. 

I suppose every one knows that in these modern days brokers in 
paper — a profession hardly known 40 years ago — supply a vast amount 
of the business paper which lines the discount trunks of our banks, and 
that a very large class of business men, who keep bank accounts and 
borrow money, prefer to borrow through these paper brokers. 

Paper that is offered between Boards — and Boards usually meet but 
twice a week — is generally passed upon by the President, Finance 
Committee or Cashier, or by all combined. B at such as may be accepted 
is all "read off" at the first meeting of the Board; and in the best 
managed banks, a single growl of dissatisfaction over any piece of paper 
taken in the interim named, will lead to its earliest possible sale from 
the loan. 

A ''one man bank " is not to be held up as a model. 

Directors are chosen so that there shall be a division of responsibility 

and that wisdom and safety which comes from a multiple control. And 

Directors who are not willing to attend to their duties and assume their 

share of responsibility ought to go into some other business. And any 

bank President, who is anxious to do everything, and assume all the 

responsibility, ought also to go into some other business — perhaps that 

of private banking. 

THE DISCOUNT CLERK. 

To use a phrase which is a favorite with the accomplished officers of 
a well-known bank, ' ' A man ought to have a good head on him for 
banking " to make a competent Discount Clerk. His position is one of 
the most important in the bank. His duties are of a character requiring 
skill, rapidity and accuracy, and he has certainly good opportunities 
for making use of fine abilities for figuring and systematizing, as there 
are few places in a bank where short and intelligent processes, and 
bright, advanced ideas in methods tell better than in the Department 
of Discount. 

His position, in the matter of promotion line, is next to the Cashier. 
Or perhaps we had better modify this statement a little by saying,, 
that in banks which have both Paying-Tellers and Discount Clerks,. 
these officers stand on about the same round of the ladder up which 
bank officers climb to the offices of President and Cashier in those 
best-arranged banks where civil service promotions are the order of 
march. 

The nature of the duties of such offices as Collection Clerk, and 
Corresponding Clerk, are of a character somewhat better adapted to 
qualify their holders for the higher positions of Cashier and President 



120 PRACTICAL BANKING. 

than are those of Teller and Book-keeper. But able clerks may take 
comfort in the fact that it does not, after all, make much difference 
how a man starts in a bank, if he has the right stuff in him and buckles 
down early to the resolution to learn all there is to be learned about 
(banking. 

The utmost caution and carefulness are demanded in the adminis- 
tration of the details of the business of making loans and discounts. 
This division of the bank must be managed in a most systematic and 
exact manner. Here are some special maxims which the Discount 
■Clerk should strictly adhere to: 

All contracts made with customers for money advances, either in 
"the way of loans or discounts, must not be left hanging upon the 
blender and easily disconnected thread of a simple verbal engagement 
made between the lending bank and the borrower. Just as soon as 
the bargain is agreed upon a clear and most explicit entry of the trade 
in black and white should be made in full upon that book of the 
bank which is known as the Application Book, and the correct and 
prompt keeping of this book must be always insisted upon. When the 
r-ecord of this negotiation has been made, it should be marked with the 
-approving check-mark of the Directors of the bank, signifying that it 
is correct and as agreed upon in all points. 

All calculations of interest and all filing and covering of notes in 
the Discount Department should be examined by a second pair of eyes. 
The examiner in this case may be detailed from aDy other department 
which may be able to offer for the purpose an officer who has the tune 
;and ability to do work of this class. 

In his intercourse with customers of his department the Discount 

'Clerk should exercise the most careful judgment, extreme courtesy 

;and invariable promptness. He should carefully avoid making any 

xef erence to the special duties and operations of his department out of 

i;he bank, when such reference can by any possibility lead to the public 

exposure of facts which it may not be advisable to have known outside 

•of the bank. 

DISCOUNT RECORDS. 

Some banks, and some even which are large and systematically 
managed institutions, keep no sort of an Application Book. The person 
borrowing money of such a bank — making a loan negotiation with it, 
of any sort — simply goes to. the Manager, shows his security, makes a 
verbal trade, and passes along to the Discount Clerk, who puts the 
negotiation through the books, giving the borrower his money or 
•credit. But it is far better to have every such negotiation entered 
first upon an Application Book, where, before a figure is made upon 
the other regular books of the bank, all the leading facts relative to 
the proposed transaction shall be clearly recorded, so as to avoid all 
mistakes and misunderstandings. Under the old State banking system, 
the laws of many States required that every bank should keep an 



THE DISCOUNT CLERK AND THE LOAN. 



121 



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Application Book, and also obliged the 
banks to enter upon this book, not 
only all the accepted applications, but 
all the appli cations that were made, 
whether they were accepted or not. 

I have before my mind's eye one of 
those old-time Application Books with 
which I had to do. It was a cumbrous 
volume, well crammed with applica- 
tions of every name and nature. When 
the old-fashioned State Bank Examiner 
came along, he used always to call for 
this book and look it over carefully to 
see what was the drift of the discount- 
ing business we did and did not. 

It was our habit to paste in all the 
original application letters and sheets 
and bits of sheets; so, as a conse- 
quence, the Application Book became 
in time a crowded scrap-book. 

It should certainly now be an iron 
rule in every bank to have every 
application for a loan that has been 
accepted — that is, every trade for 
paper, etc., that has been made by the 
bank — at once recorded upon a well- 
ordered Application Book. 

Memory is often treacherous ; misun- 
derstandings are always turning up; 
the President may forget ; the customer 
may forget, or misunderstand ; so put 
it down in black and white, at once ; 
and then, whether the paper or other 
security come after, late or early, there 
will stand the terms relative to it. 

Here is a perfectly simple and prac- 
ticable form of an Application Book. 
which can be used advantageously by 
any bank. (See Form 22.) 

I once knew of an excellent bank 
which had a most singular experience 
with its President, which experience 
comes under the head of discounting ; 
and I think it just possible that this 
bank would have escaped its disagree- 
able complications if it had kept a good 



122 



PRACTICAL BANKING. 



formal Applioation Book. The President in question, a most able and 
estimable man, began, through ill health, to lose his mind while in 



'UQgWV\X. c^0JL/CAPr6o ^ 



PROMISO Ft 



ENDORSERS^COLLATERhl 



PAYABLE' 



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Form 23— left-hand page. 

harness. His condition was so pecuUar that his weakness was at first 
hardly noticeable. He was "solid" in every direction but one, and 
that one was a fatal failing for a bank President. He suddenly took on 
the idea that there was no end — no bottom to the resources of his 
bank, and so began taking every piece of paper — every loan that was 
tendered him. Brokers presented long lists. "I'll take the lot," was 
the quiet verdict of the amiable President. As may be supposed, this 
sort of thing did not go on long. 

The most formal and important book kept by the Discount Clerk is 
the one in which he enters the full record of all his discount transac- 
tions. Other books of his are aids of, and adjuncts to, this book ; this 
book is the central book of his department. On pages 122 and 123 (see 
Form 23 — left and right-hand page) is given a sheet from it— which 
readily shows its entire character. This form, like all those which I 
present in these pages, is from a book in daily practical use in a bank, 
and has been selected from many styles to which I have had my 



THE DISCOUNT CLERK AND THE LOAN. 



133 



attention called. The figures need no explanation, 
officer can see through them by a little study. 



Any junior bank 



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Dafe For whose account 



Amount 



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Form 23— right-hand page. 
MATURITIES. 

Under this title the Discount Clerk keeps a book which is a record 
or tickler showing a complete list of all his paper arranged in the order 
of its maturity, and each piece is written into its proper place in the 
list at the time of the other records, that is, as soon as it becomes the 
property of the bank. Such a list should show when the paper was 
taken and give a fairly full description of each piece. 

A good point which has been put in successful practice under my 
observation, of which I have seen the value, is to make against each 
note a minute of the rate at which the paper was discounted. 

One important use of this minute can be made when, in making up 
semi-annual statements of net earnings in preparation for declaration 
of dividend, an endeavor is made to get at a pretty accurate estimate 
of interest unearned. 

A secondary use of this interest record is that which the bank 
Manager makes of it, when he turns to its figures to discover what rate 



124 



PRACTICAL BANKING. 



he last charged on a maturing note which now comes up with a call 
for a renewal. 

MEMORANDUMS AND TICKETS. 

In casting interest upon paper which is passed into the loan of a 
bank, and the net proceeds of which are either placed to the credit of 
dealers with the bank, paid at once to borrowers through the Paying- 
Tellers, or remitted fo them by mail, it is extremely desirable that the 
parties for whom the discounts are made should be furnished by the 
Discount Clerk with a statement in detail of the figuring of the paper 
discounted, recapitulating the dates, time to run, and gross and net 
amounts of the paper and interest deducted. This can just as well as 
not, be made out in a neat and systematic form on blanks specially 
prepared for the purpose. Statements so executed evidence a thor- 
oughness and intelligence which reflect credit upon the methods of the 
institution employing them. Here is a model form of the character 
we have suggested : (See Form 24.) 



& 



Memorandum. 



1890. 



~T^(y$£rct/Sla>.. from Sixth NatfonaFHank of Boston. 



from 









/ad 



^ 



(FcT<i to^. 



6*2, 



7 






Vy 



of/- 






cfy?& 



^^^2^^ 2^^ 






^2£^ 



fy/VA 



Form 24. 

When the proceeds of the paper discounted are handed to a 
borrower by the Paying-Teller, or passed to the credit of a dealer with 
the bank by the Receiving-Teller, one of these statments of the discount 
transaction should also be handed over to the customer. 

When the discount is to be advised or remitted by mail the letters 
of advice or remittance should also cover one of these statements. 
They are of special convenience to the Book-keepers and clerks of 
those parties for whom the paper has been discounted, and they fully 
appreciate the convenience of having before them for comparison the 
bank's statement of its figuring in detail. 

Where the discount operations are between banks and corporations 
which are subject to periodical examinations by auditors these state- 
ments of discount transactions are also particularly serviceable. 

THE DISCOUNT CLERK AND THE TELLERS. 

The business connection between these officers is close and fre- 
quent, and their systems of transacting details of matters coming 



THE DISCOUNT CLERK AND THE LOAN. 12& 

between them and intertwined in their departments should be of the 
most methodical type. Thus, for instance, the Paying-Teller is being 
steadily called upon by the Discount Clerk, in a bank where the loaning 
transactions are constant and heavy, to pay out over his counter the 
proceeds of paper discounted or of loans made. In the press of business, 
and when customers are in a hurry, the Discount Clerk, may be 
tempted to speed matters by giving hasty verbal orders to the Paying- 
Teller to make the payments in question with the understanding that 
he will in due time pass over to the Teller the written pay-loan ticket 
which is in common use in all well-regulated banks. The waiving of 
the immediate use of this ticket — and indeed, all payments upon verbal 
orders — should, if possible, be avoided. The money goes out in such 
cases voucherless; and, if the Discount Clerk happens to forget to 
follow the payment with the ticket, the Teller may find his cash in 
confusion and short — at the close of business. Here is a good form of 
a pay-loan ticket (see form 25) — an order which should, as we have 
said, precede all payment made by the Paying-Teller of money which 
has been negotiated for through the discount department : 











yp-cJadUt jy, 


189^. 


Pay 


&-a^£<wi 


ofctf 


^-tf. $6;00V 




Charge 


Loan 


J$tZ<m^d (^fid4 / Discount 


Clerk. 



Form 25. 

Loans made by a bank are often passed to the credit of customers 
on the books of the bank instead of being paid out over the counter — 
made, or added to a credit balance upon which the customer is to 
draw at his pleasure. In such a case the Discount Clerk gives to the 
Receiving-Teller a similar ticket only so varied as to be a " Credit" 
instead of a "Pay" loan ticket, as below. (See Form 26.) 





i^o^de^ iy ; 189^. 


Credit j#W^ 


dH&u CJQyjl. $40,000. 


Charge Loan. 


u%Z<m<ed (^fkd/, Discount Clerk. 



Form 26. 



126 PRACTICAL BANKING. 

In this, as in the direct payment made over the counter, the Teller 
should not make the credit until he has received the ticket, and thus 
avoid depending on the discount officer's recollection of his verbal orders. 

The Paying-Tellers are also often called upon to credit loan with 
amounts of partial payments made upon demand notes. In such 
cases they do not have the covers of the notes from which to make 
their credit entries, for these covers remain with the unsettled notes 
in the hands of the Discount Clerks. The Paying-Tellers will therefore 
need credit tickets which may be of this description and the Discount 
Clerk cannot feel that his duty is done until he has made sure of a 
proper disposition of the payment received by furnishing the Teller 
with this credit ticket : (See Form 27.) 



TENTH NATIONAL BANK, ^/i^ 189^ 



C red it— i^V^^ 



^usm,€.w/Jyu $.(& 



000 



Form 27. 

The Discount Clerk should take special pains to see that all the 
entries bearing upon or connected with his department are rightly 
made by the Tellers. This he can do by daily checking off at the 
close of the day's work the entries in question and by comparing his 
balances with those of the Book-keeper. 

TAKING CARE OF THE NOTES. 

In most banks both the discounted and collection notes are placed 
in wrappers, or what banks term ' ' covers. " The notes are neatly folded 
within these covers and placed in files in the order of their maturity. 

Upon the face of the cover is a complete description of the enclosed 
note and a proper record of the transaction through which it came 
into the bank ; that is, in the case of a discounted note, for whom it 
was done, when, and on what terms. An advantage in the use of 
covers is that the Clerk has a clear, systematic, and uniform record 
from which to make the entries on his books. 

Again, as some of these notes are payable in the place where the 
bank is located, and others payable at distant points, it is quite an 
object with the clerks handling them to have some easy method of 
distinguishing the one from the other at a glance as they rest in their 
files. For this purpose the practice of using covers of two colors has 
been happily introduced — a plain white color, for instance, for the in- 
town paper, and some clearly distinctive colored paper for those notes 
which are to be sent away for collection. A more modern practice 



THE DISCOUNT CLERK AND THE LOAN. 127 

than covering notes is that of filing them away in portfolios. These 
wallets or cases are divided into as many departments as there are days 
in the month, and there are also in steady use as many portfolios as 
may be required to meet the month demand of the departments. 

ACCURATE INTEREST. 

The Treasury Department pays accurate interest, founded on 365 
days in the year. To find accurate interest, count the actual number 
of days, find one year's interest on the given sum at the given rate and 
take as many 365ths of this interest as there are days in the given time, 
thus : Wanted true interest on $1,000, at 6 per cent., from May 17th to 
July 18th, or 62 days. One year's interest is $60. $60 -*- 365 = 0.16438 
X 62 days = $10.19177, or $10.19 true interest. Or, multiply one year's 
interest on the given sum at the given rate by the actual number of 
days and divide the product by 365, thus: $60 X 62 = 3720 -*- 365 = 
$10.19177, or $10.19 accurate interest. 

A MARK OP OWNERSHIP. 

In the management of this department, as well as in the manage- 
ment of every department of the bank, every possible check against 
losses by errors, carelessness, and dishonesty, should be rigorously put 
in force. Here is an idea in regard to safeguards in managing the loan 
that is worth considering and adopting : 

The paper in this department is negotiable paper. It is lying along, 
in its progress towards maturity, in a somewhat exposed and unpro- 
tected situation, unless the bank places upon it just as soon as it comes 
into its possession — just as soon as it has purchased it by discounting 
it — some mark of its proprietorship, which cannot easily be removed. 
Otherwise, what is to prevent an unfaithful officer from taking it from 
its covers, or files, while it still has time to run, and marketing it 
through unsuspecting note brokers, etc. ? 

Examinations of the notes discounted by Directors are rare, and 
such abstractions might remain undiscovered for months. I have 
known of such abstractions, and I have known them to remain unde- 
tected for a long time. 

I have this suggestion to make in the premises : Let every piece of 
paper be stamped, as soon as taken on by the bank, with a stamp 
placed over the endorsement of the paper, in this business-like man- 
ner : " Pay to the order of the National Bank." 

If paper is foreign paper to be sent away in due time for collection, 
this stamping comes in all right ; for it has only to be completed, by 

the addition of an endorsement of the National Bank to pay 

to the order of its foreign collection agent, to put it in a negotiable 
condition — in a shape to be sent along to its point of payment, for col- 
lection and credit, or remittance. 

If it is home paper that is to be collected over the counter of the 
bank — all that remains to be done when it has been paid is to receipt 



128 PRACTICAL BANKING. 

it — to put a Teller's stamp upon it signifying that it has been paid to 
the National Bank. 

Another way of placing the bank's mark of proprietorship upon 
the discounted paper is by embossing upon it a stamp of ownership 

after this style: " The property of the National Bank." The 

only objection to these suggested plans is this : Banks may, for occult 
reasons, wish to take paper from their discount files and sell it through 
outside parties in open market. If offered in market through paper 
brokers, etc. , with any evidence upon it of its previous ownership by 

National Bank, it might appear as if the bank had become 

alarmed about its standing, and, for that purpose, was trying to shove 
it off. But the advantages of the plan overtop the objection. 
CASTING INTEREST. 

Banks live upon interest. To calculate it rapidly and correctly is 
an accomplishment that the bank officer must at once acquire if he has 
to do with the discounting or collection departments ; and it is also a 
qualification quite likely to be brought into requisition in any depart- 
ment of banking. 

There is no class of bank service in which practice tells more effect- 
ively than in interest-casting. 

Nothing but practice can make an expert and correct Interest Clerk ; 
and there seems to be scarcely a limit to the skill which constant prac- 
tice in this line may bestow. 

There are a vast number of rules in vogue for casting interest. The 
bank officer can select from these, in the various manuals upon the 
subject, according to his tastes. But, in time, if he works largely upon 
interest, he will get beyond most rules, and work mainly by precedents, 
and by what may be termed inspection, acquiring finally such expert- 
ness that he will, to the inexperienced, seem to have well-nigh the power 
to see, at a glance, what discount is to come out of the note which is 
before him. 

I give a few specimens of interest rules — here is one which is a 
favorite with many Discount Clerks, but which, like all such rules, 
would only be used when no shorter methods of getting at the right 
results presented themselves. 

This rule is to first get the interest at 6 per cent. , by multiplying the 
principal by half the number of the months and one-sixth the days, and 
then reach other rates by additions and deductions as I explain. 

Thus, given the question of the interest on $10,000 for 4 months 
and 6 days, we make the following figures : 

One-half of the months is two, or, in other words, two per cent., 
and one-sixth of the days is one, or one-tenth of one per cent. This 
gives . 021 as a multiplier. With $10, 000 as the multiplicand, the product 
will be 210,000, or $210, which is the correct interest on the sum given, 
for the time named, at G per cent. 

Now, if you are after the interest at some other rate than 6 per cent., 



THE DISCOUNT CLERK AND THE LOAN. 129 

aliquot parts of the six-percent, result may be added or subtracted as 
follows : 

For 10 per cent, add % For 5 per cent subtract 1-6 

For 9 per cent, add % For 44 per cent, subtract V* 

For 8 per cent, add % For 4 per cent, subtract }4\ 

For 1)4 per cent, add J4 For 3 per cent, subtract .}4 

For 7 per cent, add 1-6 For 2 per cent, subtract %x 

Most of the usual modes of casting interest, like the preceding rule„ 
are founded upon the idea that the year is cut into twelve months of 
thirty days each. Though this is not exactly correct the results 
obtained are sufficiently exact for most practical purposes. Again, we 
see that at six per cent, per annum the interest on $1 for one year is 
six cents; for two months, or sixty days (one-sixth of a year), it is one- 
cent, or one-hundredth of one dollar ; for six days (one-tenth of sixty- 
days) it is one mill, or one-thousandth of one dollar. Hence to find 
the interest for two months point off the two right hand figures of the 
dollars as decimals, thus : 

The interest on $2,530 for two months is $25 30 

The interest on $2,530 for six days is $2 53 

And the interest on $2,530 for two months and six days is $27 83 

I have alluded to the short process of interest-casting adopted by- 
expert Interest Clerks. Here are a few explanations of these methods,, 
by the use of which such clerks reach interest products with the use= 
of very few figures and little time. They operate from, and by, any- 
number of interest precedents which long thought and practice in the 
business of casting interest have firmly established in their minds. 
Given any sum and any time, they select from these lines of precedents 
the fitting ones, and, by their aid, leap quickly to the desired interest 
results. 

I have now in mind such points of departure for interest calculations 
as those mentioned in my last illustration. 

I list here a number which are all based upon the standard principle 
that in two hundred months simple interest at 6 per cent, will equal 
the principal. Now, dividing the two hundred months into aliquot 
parts, we see that the interest — 

For 2 months, or 60 days, is 1 per For 12 days it is 2-10 of 1 per cent, 

cent, of the principal. For 15 days it is % of 1 per cent. 

For 3 months it is 1*4 per cent. For 18 days it is 3-10 of 1 per cent.. 

For 4 months it is 2 per cent. For 20 days it is 1-3 of 1 per cent. 

For 1 month it is )4 per cent. For 24 days it is 4-10 of 1 per cent.. 

For 6 days it is 1-10 of 1 per cent. 
These are only a few simple illustrations on this point. The experi- 
enced Discount Clerk has his head full of interest data of the character 
I have named; and, when an inexperienced person sees him figure 
interest, almost without the use of figures, he may understand that his 
method is not based upon rules found in arithmetics, but upon long 
practice in getting at interest by all sorts of mental calculations. 

And, if this interest expert is asked to tell another person how ta 



130 PRACTICAL BANKING. 

cast interest quickly — how to do it as he himself does it — he can only- 
say that he cannot teach him directly how to do it, but can tell him 
how he, in time, may teach himself how to do it — may study and 
practice himself into it. 

The precedents, or data, which I have just listed are all based on a 
G per cent, rate of interest, and results reached by them require, of 
•course, to be varied for other rates, as shown in my first example. I 
have known clerks who were not only thoroughly at home in these 6 
per cent, periods, but had in constant use similar data for such rates 
as 4 and 4J- per cent. 

Thus, for 4 per cent, they started with the fact that three months' 
interest was 1 per cent, of the principal, and nine days' was one-tenth 
of 1 per cent., and used multiples and fractions of these periods just as 
we did above of two months, and six days. For 4^ per cent, the periods 
would be 80 days, and 8 days ; and I add an illustration of this manner 
of figuring 4 per cent, interest : 

To find the interest upon any given sum for any number of days at 4 per cent., 
point off three places as the interest for 9 days, and proceed with 9 as the factor in the 
same way as you do with 6 in 6 per cent, interest. 

The interest upon any given sum for 6 days at 6 per cent, is the same as 9 days' 
interest upon that sum at 4 per cent. 

The interest for 6 days upon $6,000 at 6 per cent, is $6.00. 

The interest for 9 days upon $6,000 at 4 per cent, is $6.00. 

EXAMPLES. 

Find the interest upon $1,000 for 36 days at 4 per cent. 

THE OLD WAY. 

Point off three places $1,000.00 interest for 6 days at 6 per cent. 
Multiply by 6 ; as 6 in 36 goes 6 times 

and result is $6.00 interest for 36 days at 6 per cent. 

Take off one-third $2.00 to make interest 4 per cent. 

And we have $4.00 interest at 4 per cent. 
THE NEW WAY. 

Point off three places $1,000.00 interest for 9 days at 4 per cent. 
Multiply by 4; because 36 days is 4 

times 9 days, and we have $4.00 interest for 36 days at 4 per cent. 

Find the interest upon $3,000 for 39 days at 4 per cent. 

THE OLD WAY. 

Point off two places and divide by 2 as the interest for 30 days, or $15.00 

Point off three places, as 6 days' interest, or 3.00 

Divide this $3 by 2, as 3 days interest, or 1.50 

And we have as a result 39 days' interest at 6 per cent., or $19.50 

Now take off one-third to make interest 4 per cent., or 6.50 

And we have the interest at 4 per cent., or $13.00 

THE NEW WAY. 

Point off 3 places as interest for 9 days at 4 per cent, and we have $3.00. Now 9 

Into 39 will go 4 times, and 3 remaining. 4 times $3.00 is $12.00, the interest for 

36 days. The interest for 9 days is $3.00, and for 3 days it will be one-third as 

much, or $1.00. This added to the $12.00 makes the interest $13.00, same as above. 

F'ORM OF OPERATION 

$3.^0 X 4 = $12.00 

One-third of $3.00 = 1.00 

Which makes $13.00 interest at 4 per cent. 



THE DISCOUNT CLERK AND THE LOAN. 131 

INTEREST TABLES. 

These have their place in practical banking, but they do not fill a 
very large vacancy. Discount Clerks make but infrequent use of them 
and very many people never think of referring to their pages. Experts 
in casting interest and men who. like Discount Clerks, are at all times 
up to their eyes in calculating interest have not the patience to turn to 
interest tables for aid or even confirmation in the work of making 
interest calcula|jgns. Their short-hand processes of casting interest 
are the fruits of constant practice and quicker and better than any 
table processes. The experience of most practical bankers tallies with 
each other. A discount officer may be for years in a large bank, where 
scores of small business notes are almost daily ground through the 
loaning mill, and have standard interest tables of the period lying 
around, yet not make any use of them except for occasional reference 
where there are stubborn cases of variance in figures between himself 
and the dealer. For a use of this kind these tables may once in a 
while be in request and for this reason every bank should have them 
in its library. It would be out of place to attempt to decide which is 
to-day the best book of interest tables in the market. The advertise- 
ments in the bankers' periodicals present the claims of various interest 
manuals, and there are many good ones. Bank officers who wish to 
use such a book can easily tell by examination which suits them the 
"best. They are all alike in their leading feature of bringing together 
within their two covers what may be described as a vast number of 
interest solutions — answers to interest conundrums, based on wide 
ranges of time and rates. But there are different ways of arranging 
these books of tables, and upon the merits of their arrangement their 
value hinges. The interest results have of course to be brought within 
limits to be determined by the question of convenience in hunting up 
the needed replies, and a table which attempts to give too many rates 
and dates must be very skillfully arranged not to defeat the end aimed 
at by making the task too hard and long of hunting up and applying 
its solutions. 

CALCULATING TIME. 

In the work of calculating time on business paper — on notes and 
acceptances — bank clerks apply the methods common with them in 
casting interest. 

That is they do not work so much by rules as they do by short-hand 
mental processes. And the expertness they acquire in this sort of 
business can only be reached by long practice. 

Place before me a pile of a hundred notes and acceptances, drawn 
up" on months, and I can easily calculate the time of their maturity as 
rapidly as they can be placed before my eyes — that is, I can tell when 
they are due at a glance. 

If drawn on days, it will, of course, take me longer to make out 
when they are due. There is nothing wonderful about this. The 



132 



PRACTICAL BANKING. 



ability to do this sort of work so rapidly comes from the long practice 
I have had at it. 

But I can easily give a learner a hint or two relative to this business 
of acquiring expertness in calculating time. If he is a Discount or 
Collection Clerk, let him go to work in this way. Number the 12 
months of the year by arranging them in a tabulated form in this style : 
(See Form 28. ) 



1 


2 


3 


U 


5 


6 


7 


8 


m 


to 


11 


12 


Jan. 


Feb. 


Mar. 


Apr. 


Mat. 


June. 


July. 


Aug. 


Sept. 


Oct. 


Nov. 


Dec. 


13 


Ik 


15 


16 


17 


18 


19 


20 


21 


22 


23 


2h 



Form 28. 

Then let him get this table by heart — firmly fix it in his mind so that 
it will be constantly available to him. Having done this, getting at 
the time of maturity on paper that is drawn on months is as easy as 
adding nine and six. 

Thus, for instance, I hold before him a note, dated September 6th, 
payable in 6 months. September to him, by our table, is the 9th 
month ; 9 and 6 make 15. March is the 15th month. The note is due 
March 6th-9th. 

The note is dated January 4th, payable in 8 months. January is 
the 1st month ; 1 and 8 are 9. September is the 9th month. The note 
is due September 4-7. 

The note is dated July 5, and payable in 8 months. July is the 7th 
month ; 7 and 8 are 15. March is the 15th month. The note is due 
March 5-8. 

I originated the idea of committing to memory this numbering of 
the months, from 1 to 24, many years ago, at a time when I was 
called upon to file away an immense number of notes in a day. I have 
never had occasion till now to reproduce the table on paper — it then, 
by practice, became so fixed in my mind. At that time I handed, on 
some days, a thousand promises to pay to the Note Teller to collect. 
The skill to cast time correctly on this plan, when once thoroughly 
acquired, seems to remain long after practice upon it has ceased. 

DISCOUNT TIME. 

A note written payable a certain number of days from date must 
have its maturity ascertained by taking just that number of days and 
the three days of grace, without any regard to the month. Thus, a 
note of 90 days from November 10th matures in 93 days — on February 
8th-llth. 

The discount time is a question of custom. The New York custom 
is to reckon the days to maturity on everything. In most, if not all, 
of the Boston banks the actual days are reckoned when the note is 



THE DISCOUNT CLERK AND THE LOAN. 133 

written in days, and months and days are reckoned when the note is 
written in months. 

DEPOSITORS' RATES. 
The banking business as far as loaning money is concerned is in a 
muddle in some localities from causes which will be recognized and 
fully understood by most experienced bankers. The business of paying 
interest upon deposits has so woven itself into the banking system that 
its influence must now be taken into full account in any discussion of 
banking. Banks are so generally in the habit of paying interest upon 
all deposit accounts which are of respectable size that depositors of 
this class who do not have an interest contract expect compensation for 
their accounts of another sort, but well up to the proportions of that 
received by the accounts upon which interest is paid. This compen- 
sation is discount accommodation on what may be called nominal 
terms — loans of money whenever they are in want on rates based not 
on the market rates but on their claims as depositors. This matter has 
become so difficult of adjustment and so demoralizing in its influence 
upon rates for loans that many bankers have at times been inclined to 
favor the adoption of a plan which would do away entirely with all 
discount obligations to depositors by paying a small rate of interest 
upon all important deposits and loaning their money in open market 
at the best rates possible, thus doing business very much on the London 
joint-stock bank and American trust company principles. 

FORWARDED PAPERS. 

At least once in six months, in every National bank, there is a full 
examination of the bank — of all its departments, assets, etc. When 
the Directors are making this examination, they find, on reaching the 
Discount Department, that much of the discount paper belonging 
thereto has been scattered far and wide, in places where it is payable, 
and where it has been sent for collection on account of its nearing 
maturity, and that all they have before them is a record of the paper 
in the shape of covers, etc. 

It is a most excellent and well-nigh indispensable plan for the 
discount officer to anticipate and prepare for this state of things — this 
absence of his vouchers— by securing, when he sends away foreign 
paper that is to be absent at an examination period, acknowledgments 
from the banks, etc. , to which it has been sent, stating, in full detail, 
just what paper they have received. These descriptive letters of 
acknowledgment are of great convenience and satisfaction to examiners. 
I have never considered it a very good plan to forward foreign collec- 
tions much in advance of their maturity — not farther in advance than 
is needful in order to get them to the points where they are payable in 
ample season to secure their due notification, and also to secure an 
acknowledgment of their non-receipt, in case of accidents, in season to 
send duplicates to take the place of the lost or miscarried paper. 

Perhaps as good a rule as any is to send forward for collection, in 



134 



PRACTICAL BANKING. 



the middle of one month, all the paper maturing abroad in all the next 

DEMAND COLLATERAL NOTES. 

The following (see form 29) is a good form for a note of this class: 




Form 29. 

It is a copy from one in actual use in one of our largest banks, and 
was framed with the greatest care. Notwithstanding all the strength 



THE DISCOUNT CLERK AND THE LOAN. 135 

of expression which has been framed into this note, and into the 
general run of notes of this style, regarding the concession of authority 
to the payee — the bank, to sell without notice either at public or 
private sale, or otherwise, all the collateral pledged — it is still a question 
whether a bank can, under existing statutes and common law, proceed 
thus summarily and unceremoniously if the pledgor protests against 
such peremptory sale. 

From very high authority, however, I have obtained the following 
concisely expressed opinion : 

" In regard to sale of collateral security, k without notice, either at public or pri- 
vate sale,' as per agreement signed when depositing it. 

" It is competent for the parties to agree by express teems that, upon the 
pledgor's default or upon his refusal to keep the security good, the pledgee may sell 
at public or private sale, at his option, without giving notice to the pledgor of his 
intention, or of the time or place of sale. 

Milliken vs. Dehon, 27 N. Y., 364 (cotton). 

Chouteau vs. Allen, 70 Mo., 290 (bonds). 

Loomis vs. Stave, 72 111., 623 (bonds). 

Md. Fire Ins. Co. vs. Dalrymple, 25 Md., 242 (B. & O. bonds). 

Genet vs. Howland, 45 Barb., 560 (Pac. Mail stock). 

Hamilton vs. State Bank, 22 Iowa, 306 (IT. S. bonds). 

Fitzgerald vs. Blocher, 32 Ark., 742 (Ark. Treasury certif)." 

RATES FOR LOANS. 
There are some general principles governing the theory and practice 
of bank loaning and discounting which it may be profitable to mention. 
In loaning money on demand, when it is strictly understood between 
bank and borrower that the money so advanced is positively and purely 
minute money — to be called in promptly whenever the bank needs it 
and to be paid promptly when called — banks are accustomed in ordin- 
ary times to charge low rates of interest, and are certainly justified in 
so doing. There are, of course, exceptions to this practice. Banks 
sometimes loan more or less of their funds on nominal call to dealers 
and others who have some real or imaginary claims upon them for 
accommodation of this description. This nominal demand money is 
taken by the borrower with the mutual understanding that it shall be 
repaid, not when the bank may need it and be inclined to call for it, 
but when the borrower no longer needs it and finds it convenient to 
pay it back, no matter what may be the wants or wishes of the bank 
in regard to it. These loans are a great convenience and accommoda- 
tion to the borrower and an inconvenience to the lender. The fewer 
loans of this type a bank has outstanding the better for the institution. 
But somehow or other most banks finds themselves obliged to carry 
along more or less of this unavailable minute money — the minute 
characteristic being apparent only in the fact that the borrower can 
pay it any minute he pleases and will not pay it one minute sooner 
than is convenient for him so to do. Any experienced banker will 
concede that ' ' demand " loans of this character should pay the highest 
rates of any loans made by the banks, and all bank Managers will, 
when they can, charge more on them than on any class of time-paper. 



136 PRACTICAL BANKING. 

Again, in periods of great stringency — of panic — borrowers who have 
full faith that the close times will be of short duration are often glad 
to pay very high rates for call money rather than indulge in the luxury 
of a discount at the current high rates, because in this way they hope 
"to tide over the days that may elapse before rates on time-paper sink 
to a normal basis. During such periods sagacious bank Managers are 
willing to strain a point — to run up their loan a little higher than they 
othewise would — in order to take on long paper at the current high 
rates — that is, they aim to keep out as little call money as safety will 
allow, no matter how high it may bid, and discount all the long paper 
prudence will approve. 

BUYING PAPER. 

Banks discount paper for their depositors — and simply term the 
operation discounting. But, when they go outside of their line of 
depositors, in making investments in time paper, they generally term 
the procedure buying paper. Their dealings in this paper-buying 
Imsiness are generally with a class of traders termed note brokers, 
•or with private bankers and brokers. 

There is a deal of talent and capital in this business of buying and 
selling paper ; and, in our large cities, it is conducted with a skill and 
to an extent that would not have been dreamed of thirty or forty years 
^ago, when note brokers were few in numbers and small in their volume 
of business. 

Here I cluster a few points of value and interest, which relate to 
note buying by the banks, and note selling by the dealers. 

The heavy firms in the large cities, whose profession is that of 
dealing in time paper, generally own a large proportion of the paper 
they are currently offering for sale to the banks and private capitalists, 
[having bought it outright of promisors, endorsers, etc., who have 
adopted such sale-methods as a means of raising money. 

But these large negotiators are also generally in the habit of doing 
-quite a share of the commission paper business. 

These extensive dealers seldom endorse any of the paper which they 
negotiate. If they fell into the business of freely adding their names 
to the vast mass of notes and acceptances which pass through their 
hands, their credit would soon suffer from that criticism which is meted 
out to parties who have the reputation of being very much extended. 

The exception to this rule of non-endorsing sometimes crops out in 
•cases where they pass a line of paper into the loan of the banks where 
they keep their own special accounts — banks which expect to give them 
a certain amount of accommodation on account of the presence of their 
handsome balances,, and which are not apt to extend a discount accom- 
modation of that nature without receiving the endorsements of their 
dealers on the paper. 

Notes bought by banks of note dealers without their endorsement 
.arc held to be guaranteed by them to be all right, in all points, except 



THE DISCOUNT CLERK AND THE LOAN. 137 

that which covers the question of whether they will be paid or not. 

The dealers give no guarantee of this, for they have not endorsed, and 

the bank uses its best judgment and discretion and takes this risk itself. 

DEMAND LOANS. 

National banks, particularly those having large capitals, and located 
in Clearing-House cities, find it a very convenient thing to put out 
quite a percentage of their loans in the shape of money on strict 
call — minute money. In some cities, notably in Boston, banks have a 
habit of borrowing of each other at Clearing-House settlements large 
amounts of call money. 

This business of the banks of borrowing demand money of each 
other, entirely without security, has many objectionable features, some 
of which I have alluded to elsewhere. 

In settlement of these Clearing-House loans between banks, the 
interest is generally made up and charged when the loans are fully 
paid, for loans of this sort do not often stand a very long time. 

But where loans of this class stand for a considerable time, the 
interest upon them should be settled as often, at least, as once a month. 

The interest upon the regular individual call loan file should 
certainly all be made up and collected once in three months. 

All endorsed demand notes held by a bank should start with a 
waiver of demand and notice by the endorser, since in time (in some 
States in 60 days) endorsers are lost — unless a demand for payment is 
made upon promisors — if this precaution has not been attended to. 

THE BROKER'S RESPONSIBILITIES. 

There have been so many lucid and unmistakable legal decisions 
upon this point that we may consider it well and thoroughly covered. 

If the note dealer, in selling notes to banks, makes what be believes 
to be fair and honest representations regarding the standing of this, 
by him unindorsed paper, which he is marketing simply as a commission 
man — an agent— and makes representations and statements of such a 
straightforward type that upon them no charge of false pretenses can 
be made to rest, he assumes simply and only this responsibility — he 
guarantees that it is what it appears to be — a real promise to pay — 
genuine in every point in date, amount, signature, etc., and that, in 
selling it, he conveys a good title to the paper. But bad is the luck of 
the honest sellers to honest buyers of notes and acceptances which have 
in and about them any fraud, for the sellers under such circumstances 
must make good all losses that may thereby come to last holders. 

There is, however, one point relative to these transactions, and just 
without the question of legal liability, which should not be overlooked. 
Although, as I have said, the dealers seldom endorse any of the cloud of 
notes and acceptances which they buy and sell, or negotiate for owners 
or makers, they make these operations with a sense of responsibility 
which, intangible as it often is, is nevertheless recognized among them 



138 PRACTICAL BAXKIXG. 

— especially among those whose standing and business are of the first 
class — as binding with something of the force of their guarantee. This 
responsibility is that which makes them exceedingly anxious that the 
paper they sell shall be paid, and that it shall prove to be, in all points, 
precisely as they have represented it to be. 

A reputation for selling only that which is good paper is what all 
reputable note dealers are striving to obtain for themselves. 

They may pass into the loans of banks and the portfolios of private 
investors poor paper in which they have had confidence, and which 
they have, in good faith, represented to be strong ; but they are exceed- 
ingly anxious not to do this sort of business. 

There is extant among some note-brokers so much of what we may 
term an honorable pride of trade, a pride in handling only first-class 
paper, that no temptation, in the way of rates or commissions, will 
induce them knowingly to have anything to do with any other sort. 

TAKE A BILL OF SALE. 

It is an excellent plan for a bank, in buying paper of dealers and 
others who do not endorse the paper they negotiate, to take a bill of 
sale of the same, and it should be carefully preserved and filed away 
like other papers of importance. 

While the note-broker who sells paper to a bank does not, as I 
have said, guarantee that the paper shall be paid at maturity, he does, 
by handling it, guarantee that it is just what it purports to be, an 
honest and legitimate promise to pay ; and right here is where the value 
of the bill of sale comes in. It is a record, in black and white, which 
always shows at once to the purchaser where the paper he holds has 
come from. 

The seller of paper is, of course, held as fully in the points we have 
described without the passing of a bill of sale. 

But it might, under some circumstances, be difficult to recall and 
prove the seller's connection with the paper if there was no bill of 
sale accompanying its conveyance. 

BUSINESS AND ACCOMMODATION PAPER. 

These are terms often heard in banks. 

Notes and acceptances that are made in settlement of genuine busi- 
ness transactions — given in payment for property purchased — come 
under the head of regular and legitimate business paper. Paper of 
this sort was far more abundant in the loans of our banks thirty or 
forty years ago than it is at present — or, at any rate, the proportion 
of paper of this sort then discounted by them was far in excess of what 
it is to-day, and for the simple reason that nowadays such notes are 
made for only a small proportion of the volume of the business 
transacted. 

I remember well when it was the custom among the dry goods 
commission houses to sell domestics to shipping houses, for exportation 



THE DISCOUNT CLERK AND THE LOAN. 139 

to India, China, Africa, etc., on credit of from twelve to fourteen 
months; and I have handled much paper of this sort. 

Another class of old time business paper, whose face was at one 
time very familiar to me, also is no longer to be met with. I refer to 
paper given on long dates for all sorts of merchandise — a list ranging 
from Waterbury brass trinkets to rum, bought of the manufacturers 
for shipment by slow-moving sailing ships to the west coast of Africa, 
and other remote and uncivilized portions of the world. 

All the methods of these branches of commerce have been changed 
since the introduction of steam, ocean cables, etc. ; and one sees in 
these days little of this old-fashioned paper in the loans of banks, or 
anywhere else. 

But the most marked falling off in the bank loan supply of this 
desirable, old-time class, of legitimate business paper has been brought 
about by other changes in the mode of transacting business. 

Thirty or forty years ago, commercial travelers— drummers — were 
hardly known. The country merchants made periodical visits to the 
cities — to the great trade centres— and made their own selections and 
purchases of goods. Each interior trader generally had one house in 
each line of his trade, on which he was dependent for his supply of 
merchandise, and from that house he made about all his purchases. 
The result was his transactions were often of quite an extensive 
character with his city dealer, and with this dealer he had credit, and 
gave him, in settlement of purchases, promises to pay, drawn upon 
varying times, arranging maturities in a manner agreed upon by buyer 
and seller. 

The discount applications at the banks were, in those days, made 
up, to quite an extent, of business paper of this particular class. I 
have handled a good deal of it in acting as an officer of a bank which 
had among its dealers many grocers and jobbers. 

Nowadays the country is scoured by commercial travelers, who cut 
the trade, which once was conducted in the manner I have described, 
into very small lots, and do the business on a cash, or cash in 30 days or 
so, basis — a basis which rests almost entirely upon open book accounts, 
and makes no negotiable business paper. 

Previous to the period of which I have been writing, a deal of 
bartering was in vogue — particularly in the wholesale grocery trade. 

Produce commission merchants who, in person or by agents, now 
cover the country, soliciting consignments, and making advances and 
purchases, were then hardly known. 

The country traders took, in trade, all sorts of country produce; 
and their city grocers received the same from them in exchange for 
West India goods and groceries, and the balances were settled by 
making time-notes. 

I note here, as an interesting fact, that, since 1850, the great refiners 
and dealers* in sugar, who scatter, in comparatively moderate sized lots, 



140 PRACTICAL BANKIIW 

their immense products of refined sugar, syrups, etc., have not been in 
the habit of receiving from the wholesale grocers, etc., who buy this 
sugar, any notes whatever. The sugars are all sold for cash in 30 days, 
on book account, and the syrups for cash in 60 days, also on book 
account. 

In the days when long lists of small business notes were constantly 
passing into bank loans, the work of Discount Clerks was, in many 
points, more arduous than at present. 

ACCOMMODATION PAPER. 

Promises to pay, which are thus named, are of a character which is 
precisely indicated by their title. In general terms, an accommodation 
note, or acceptance, is one which is signed, endorsed, or accepted by 
an accommodating party for the accommodation of some other person, 
who is also a party to the note, either in the way of signer, endorser, 
or acceptor. But, in whatever way the accommodator may, by name, 
appear on the paper, it is not understood or expected that he will have 
to attend to its payment or renewal at maturity, while the accommo- 
dated is, at the time of the execution of the paper, given distinctly to 
understand that he must attend to its settlement, whether his name 
may appear first or last upon it. 

The name of the paper in question has a bad flavor among banks, 
bankers and other note buyers. 

As a class, accommodation paper has a hard reputation — and 
deservedly so. It is not what it pretends to be. It is not issued and 
Ibased upon mercantile transactions. There is no " value received " in 
and about it — no merchandise — no material value beneath it. It has 
a pretence of being paper of more than one name, when it really has a 
most decided single-name aspect. 

For these reasons its presence in the loans of banks is watched with 
jealous eye by bank examiners, and its close acquaintance generally 
shunned by our shrewdest note-buyers. 

Any man who lends his name to a piece of paper is, of course, held 
for its payment, no matter what may be his intentions at the outset, 
or his private understandings with the accommodated party for whom 
the paper has been made. 

It follows that there are all grades and shades of accommodation 
paper, and there is plenty of this kind of paper afloat with names upon 
it so strong that no one can question its solidity, though it represents 
no actual business transaction between the parties to it, and rests upon 
no other foundation than that of mutual agreement to pay without any 
apparent value received. 

In the loans of the National banks of the period, in city as well as 
in country, there is, at the present time, a vast quantity of paper that 
is really nothing but the accommodation paper of factories, commission 
merchants and other makers, but which is about as good as gold. 

The objectionable— dangerous — class of accommodation paper is of 



THE DISCOUNT CLERK AND THE LOAN. 141 

a type which we need not further describe, and careful bank managers 
will not buy it if they know it. 

"MANUFACTURING" BUSINESS PAPER. 

He was a heavy manufacturer and shipper of lumber in a city in 
Maine, sending his product wherever there was a harbor in Massa- 
chusetts, Rhode Island, etc. He was a bank Director in the city where 
he carried on his business, and his habit was to draw through this 
bank for his lumber shipments, at three and four months' time, on his 
consignees here and there, and have the paper for the most part at 
once discounted at this bank. The paper was always made payable 
at the Boston bank where the Maine bank did its business, and this 
Boston bank received all the paper, procured its acceptance, and held 
it for collection. So the business went on year after year, large in 
volume and promptly transacted. By and by the lumber dealer lost 
his money, and very nearly ran out as far as his original and legitimate 
business was concerned. But the Maine bank seemed to be rather 
oblivious of these facts, for it kept on allowing him a heavy line of 
accommodation on discounts of what appeared to be legitimate lumber 
acceptances — drafts whose acceptance appeared to have been obtained 
by himself and bearing accepting names which sounded quite familiar 
to banking men who had long been dealing in lumber paper. The 
paper was, as usual, all made payable at the corresponding bank in 
Boston. This paper was fraudulent in all points. It was made up 
entirely, acceptances and all, by the party for whom it was discounted. 
The drawees — the acceptors— had no existence, yet their names as they 
appeared on the paper so nearly resembled the names of existing, 
strong, old-time consignees of the drawer that the bank had no 
suspicion of the deception which was being practised upon it. In 
making up this fraudulent paper the drawer had hedged against any 
charge of forgery by carefully avoiding the use, as his imaginary 
acceptors, of the names of any existing houses. He carried along this 
swindling, kiting business for a long period by paying all the paper, 
generally a little while before its maturity, through the bank where it 
was made payable in Boston. And the discovery of his irregularity 
was not made until he had become so deeply involved that he could no 
longer float even on paper so easily made and so readily negotiated, 
and when he could no longer meet this paper he ran away. 

PAPER WITH MANY NAMES. 

The comparative value of single-named paper and paper bearing 
two or more names — the class generally known as double-name paper 
— is now being quite widely discussed by bankers. In some quarters it 
is urged that banks and trust companies should not inake a practice of 
introducing into their loans paper of the single-name class, while from 
other directions we hear arguments against any statutes or by-laws 
limiting the loans of banks to notes and acceptances bearing at least 



142 PRACTICAL BANKING. 

two names. The charters of our trust companies, which emanate from 
the State, are quite rigid in this matter of requiring many names on all 
paper discounted by them. Individual paper entering into these trust 
company loans, according to the State laws governing most trust 
companies, must bear at least three names. Savings banks are generally 
bound by this same restriction. There is nothing in the National Bank 
Act of this restrictive character, but very many of the National banks 
make it a rule never to loan on single-name paper. 

There are some absurd, as well as demoralizing features connected 
with this matter of restriction in regard to the number of names 
required on paper entering into the loans of our National banks, 
savings banks and trust companies. These institutions are, at times, 
glad enough to buy at paying rates strong paper bearing one good name 
in which they have full faith, and one or two other names, as the case 
may demand, of what may be termed a straw-like, or made-to-order, 
character. This business of affixing to good single-name paper names 
of straw to meet the double-name demands I have described often 
takes on quite a ludicrous aspect. Very young men in counting-rooms, 
junior clerks and the men who "take down the shutters," are found 
endorsing millions of dollars' worth of paper which is passing into loans 
of banks and trust companies through the hands of brokers and others 
simply for the reason that the law demands the two or more names. 
Attempts have been made by Savings Bank Commissioners and United 
States Bank Examiners to institute reforms in this business, and to put 
a stop to the use of valueless and practically fictitious names in making 
acceptable paper for bankers' loans, but they have not been successful. 

I have here given a description of a bad drift in paper and it is 
easier to give a diagnosis of this case than to point out any positive 
remedy. But suggestions of a corrective and a remedial character 
readily come to mind. Paper bearing these made-to-order endorse- 
ments is often easily recognizable by Bank Examiners, Commissioners, 
or experienced bankers. When it crops out in loans of banks and trust 
companies to an objectionable extent the Examiners should make a 
note of it and send reports of the bank's habits in this regard to the 
proper quarters. They should also take occasion to suggest to the 
managers of the banks which are thus being loaded with objectionable 
paper that good banking demands a reform. 

Any educated banker will hesitate to recommend that all restrictive 
provisions in laws and by-laws in this matter of single and double paper 
shall be removed. Yet, as things are now drifting, it would seem as if 
their existence was taking on a farcical character. The character of 
our bank loans will always be governed by the character of the men 
who manage our banks. If injudicious and unreliable men are in 
charge of the bank loans no rules regarding the number of names 
which shall be on the paper they take will be of much account. 

In the best managed banks, which may be moving along under 



THE DISCOUNT CLERK AND THE LOAN". 143 

double-nanie rules, there will come occasions when it will be perfectly 
justifiable to take on paper bearing one solid name and another about 
which no questions need be made; yet such precedents should be 
followed with extreme care. Such action should be the exception and 
not a common practice. 

LONG AND SHORT PAPER. 

I have elsewhere remarked that when rates are high, with a prospect 
of declining at an early date, sagacious bank managers are inclined to 
select from the paper offered them for discount those promises to pay 
which are of long dates. This general rule is reversed when the 
situation is reversed. When discount-seeking paper bids low interest, 
and bank managers believe that early improvement in time rates is in 
prospect, they prefer to put out their money on call, or on the shortest 
time, so that they shall soon again have it in hand to sell at the higher 
prices which they are confidently looking for. 

There are also other courses of reasoning that influence the action 
of banks in their selection of dates for their loans. They must aim to 
scatter and locate their maturities, and place them, so that as the seasons 
roll around, the bank will be in a position to meet the reasonable 
demands of its customers, and avail itself of the advantages which 
must come from being in funds at those seasons when special influences 
are sure to create large and profitable public demands for money. 

The experienced banker knows, for instance, that at certain periods 
he may, if well intrenched, reap a harvest out of the calls for loans 
which are sure to come from the movers of various crops. At one 
period the cotton buyers will be using vast sums of money, at another 
the wool men, at another the corn or the wheat or the hog handlers 
will be clamoring for loans. And so I might go on. 

He is a sagacious and successful banker who, from observation and 
large experience, is able to discern the signs of the times in the transac- 
tions I have described, and shows the most skill in navigating his loans 
with a view to making the most of the influences and the elements. 

CROP AND TRADE INFLUENCES. 

Here are illustrations of the way crop and trade influences work 
upon the loan market and control the action of banks in the matter of 
regulating the rates and dates of the paper they pass into their dis- 
count files. 

In the centres of the cotton manufacturing interests of the North — 
or rather in the financial centres of this industry — the banks may, in 
ordinary times and under ordinary circumstances, count upon a large 
demand for discount accommodations from the representatives of the 
cotton mills between the middle of October and the middle of January. 
In this period the bulk of the cotton crop is thrown upon the market ; 
and in this season of the incoming of the great cotton tide the bulk of 
the purchases to supply the mills of the North are made. It is a time- 



144 PRACTICAL BANKING. 

honored saying among cotton consumers that a purchase before the 
holidays is always a good purchase. In carefully managed banks in 
cotton consuming districts resources are often husbanded to meet the 
wants of good customers who will press upon them in cotton buying 
months. As for the cotton growers themselves, it is a generally 
received idea that they are always in want of money and always 
receiving advances upon the coming crop. 

Among the wool men — those who operate and deal in wool — there 
is, generally speaking, an active demand for money in the months of 
the wool clip — months which range with the latitude from April to 
June. Wool consumers buy at all seasons, since there are few reasons, 
other than the state of the markets and the state of their finances, to 
lead them to buy at one season more than another. 

The wheat crop and the corn crop, viewed either from the stand- 
point of the producer or the dealer, are Autumn consumers of money. 
The same may be said of crops in general, with the exception of the 
examples we have already given. 

In some States there is an immense amount of money in tan pits. 
No reflection is intended upon one of the most solid and enterprising 
interests existing among us when I quote the quaint financial remark 
of a man of wide financial experience who was asked : "At what time 
in the year do the tanners generally borrow ? " His answer was : ' ' Every 
day in the year. " 

It should here be noted that mid-summer and mid-winter are in the 
North apt to be periods of comparative stagnation in the money market. 

A SAFEGUARD. 

Before I leave this matter of paper let me mention a plan of action 
that perhaps might with advantage be adopted by the banks — or, at 
least, by those banks which are located, as it were, in families in the 
cities and large towns. 

Let the banks in any given place unite in making some arrangement 
whereby they shall be enabled to know at any time the amounts of 
paper of any name, about which they may wish to be thus informed, 
which is being held in the loans of each and all of these banks. Let the 
banks, for their mutual protection, "show their hand" in the matter 
in question. 

There have been no end of instances where bank losses from bad 
paper might have been averted had the banks possessed the means of 
knowledge which I am here recommending. 

There have been, within recent dates, large and most disastrous 
failures, which have revealed to banking circles for the first time the 
existence of an extent of liabilities on the part of the bankrupts of a 
magnitude utterly beyond what the banks, who had been steadily 
loaning them up to the very day of their collapse, had ever dreamed 
of. And had they, by the use of the method I have suggested, been 
earlier informed of the way the failed houses were hedging and kiting 



THE DISCOUNT CLERK AND THE LOAN. 145 

under immense issues of their names to the loans of the various banks, 
they might have saved themselves from heavy losses and, at the same 
time, helped other suffering creditors. 

The great difficulty that stands in the way of doing something of 
the kind is that evident lack of esprit de corps — community of spirit — 
which is apt to characterize a community of banks. There are no 
reasons why this state of things should exist. 

Banks ought to be willing to work together for their mutual 
advantage in such premises as those I have named. 

DISCOUNTING WHEN .A BANK'S RESERVE IS NOT UP. 

I elsewhere clearly explain the reserve requirements of the National 
Bank Act. As I have there stated a certain portion of the reserve 
may be kept on deposit with a bank in one of the large cities, while 
at least another certain proportion must be in lawful money in the 
hands of the bank itself. 

It will be observed that the balance with the reserve agent— let us 
say in New York — no matter how large it may be, can only count as 
reserve to a certain specified extent on the whole amount of reserve 
required by the law. 

It will also be observed that Only lawful money can be counted 
as the home reserve. A bank may be carrying along a large quantity 
of National bank bills and a balance in New York largely in excess of 
the per centage which the law permits as a reserve there and still, by 
reason of its small holding of legal-tenders, not be up in its reserve in 
accordance with the demands of the law. In such a situation there 
are banks which will go on discounting and making loans in the face 
of the law which says loans must not be made when the reserve is not 
up, by paying out for such loans either National bank bills or New 
York funds, claiming they have a right to do so on the ground that 
they are not encroaching on their reserves. This course is not a proper 
one. The Bank Act says distinctly that loans shall not be made when 
the reserve is under, and the bank has then no right to use any of its 
assets in making loans, no matter what the character of those assets 

happen to be. 

THE TEN PER CENT. LIMITATION. 

The ten per cent, limitation of the Bank Act has an application 
which is sometimes overlooked by bank managers. National banks 
are prohibited from loaning over ten per cent, of their capital to any 
one individual or corporation, except upon paper representing actually 
existing merchandise. This ten per cent, provision, therefore, must 
apply to loans made by any National bank to any other bank, National, 
State, or private. 

NATIONAL BANKS AND LOANS ON REAL ESTATE. 
A National bank can take a mortgage upon real estate as security 
for debts due, or enter into full possession of the same class of property 



146 PRACTICAL BANKING. 

in the discharge of debts, yet it cannot make advances upon pledge of 
Teal estate and buy and sell this class of property. Where it has, by 
force of debt circumstances, become the owner of real estate mortgages 
or of real estate the Banking Department at Washington takes the 
ground that it must relieve itself of such holdings as early as practicable. 
Bankers and business men, mainly of the South and West, have 
4rom the beginning of the National bank system been urging the 
necessity of such a modification of the National Bank Act as shall 
permit National banks to enter regularly and systematically into the 
business of making loans upon real estate, but though there is much 
that may be urged in regard to this proposed amendment it has never 
been received with favor by the majority of our best practical and 
theoretical financiers. They hold that advances upon real estate, as 
far as banks are concerned, should be left to savings banks, which are 
peculiarly competent to make what may be termed perpetual uncol- 
lectible loans upon solid security, while banks of the other class are 
from the nature of their deposits best adapted for the negotiation and 
management of easily collectible loans of short dates. There is no 
immediate prospect of any modification of the Bank Act in this respect, 
and it is well that such is the case. 



THE BANK'S COLLATERALS. 



147 



To 



Demand. 



CHAPTER VHL 

THE BANK'S COLLATERALS. 

One cannot with difficulty over-estimate the importance of this topic. 
The stock, bond and various other classes of paper securities which 

are held by our banks as collateral security are usually put in the 

charge of the Cashier or Discount Clerk and kept in the safest place 

the bank has at command. These 
securities are not the bank's prop- 
erty and their pledgors are one 
and another borrowing dealers, 
who have been in the habit of 
taking good care of them, and who 
wish the bank to do the same. 
They should be neatly packed 
! away, and care should be taken 
| not to have them torn or dis- 
I figured. Boxes of tin, or some- 
! thing of the sort, should be used 
by the bank for the storage of 
the shares and bonds in the vaults. 
The officer in charge should 
have them very neatly and sys- 
tematically arranged and in such 
shape and with such accompany- 
ing descriptions that they may at 
all times be in readiness for easy 
and correct examination at short 
notice by Directors or Bank 
Examiners, and easily handled 
for exchange or for final delivery 
to the pledgors. The condition 
of the collaterals in these points 
of arrangement and tidiness is a 
gauge of the character of the 
general management of the officer 
in other points of his administra- 
tion. Form 30 on this page is a 

descriptive cover for use in the filing we have just specified above. 

These covers, or labels, are made from good stiff pasteboard, and are 




Collaterals:- 

i &¥-&*- ecu* '<y 

\ oT Set 



1 <P&iJl<OL/ 



7f 



148 PRACTICAL BANKING. 

intended to be strapped upon the collateral they describe with straps of 
rubber or leather. 

If the securities are held by the Cashier, and the secured notes by 
the Discount Clerk, the Cashier should place on the notes some mark 
of his possession of the collateral as a satisfaction to the bank and 
Discount Clerk. In the progress of a collateral note towards payment 
many changes of collateral are quite likely to take place, but no 
Cashier or other officer should give up to the dealer, either in the 
way of exchange or at time of payment, collateral security held with 
notes without taking a receipt for the same. Misunderstandings, 
litigation and losses, have entered banks through bad systems of 
handling collateral. 

It is by far the better course to rigidly carry out the plan of using a 
receipt or memorandum of this sort (See Forms 31 and 32) for all such 
changes and deliveries. 



Memorandum of Change of Collaterals, 



Received....#i,000 bond Dorchester R. R. Co. 
Su'bstitute±...my check, $1,000 



Arthur Duncan & Co 

New YoTX....August 11, 1890 by Paul Graham 



Form 31. 



Memorandum of Change of Collaterals. 
Received ...100 shares Somerset R. R. Co 


substituted.... 100 shares Worcester R. 


R. Co 






H. Robin 


son & Son 


Philadelphia,. ...August 


15, 1890. 



Form 32. 

The question is very often raised whether or not banks and bankers 



THE BANK'S COLLATERALS. 



149 



examine coupon bonds which they are currently taking in such vast 
quantities to see if all the right coupons are attached when the bonds 
are taken on as collateral. Such examinations are very infrequently 
made. Neither is the borrower in the habit of looking into the 
coupon portion of his collateral when he receives the bonds back 
from responsible holders after paying the notes secured by them. 
Once in a while there is trouble, and it is found that bonds which have 
been doing a large business in a collateral capacity have somehow lost 
coupons — losses which are exceedingly embarrassing since it becomes 
extremely difficult to locate the deficiency. 

If coupons mature while the bonds are being held as collateral, a 
receipt should always be taken to show their delivery to the owner of 
the bonds ; and, similarly, dividend orders upon stock collateral should 
either be so drawn as to require the owner's endorsement or should be 
covered by a receipt. 

If a bank takes on as collateral time paper, it should have some 
perfect system by which it may certainly avoid the disagreeable results 
of letting such paper run by its maturity unpresented and thus losing 
endorsers. 

Placing dummy covers in the collection files, or discount files, and 
other plans will readily suggest themselves to bank officers as a preventive 
of the trouble named. 

It is often important for a manager to be able to know at a glance 
just what lines of shares and bonds he is loaning upon, for wavering 
markets may make him anxious about margins. For this reason a 
book, showing these facts easily and quickly, should be kept. Here 
is a good form (See Form 33) for such a book : 



COLLATEEALS. 


Chicago, Burlington & Quincy R. R. Co. 


Promisor. 


Description of Collateral. 


"When due. 


Jacob Jones. 


100 shares at 110. 


Dec. 22, 1890. 


R. Sewall. 


50,000 7 i bonds. 


October 21. 



Form 33. 

One other point relative to the exchange of collaterals deserves 
particular notice. In making time and demand loans upon collateral 
of bonds, shares, etc., bank managers are very particular at the start 
to scrutinize the character of the collateral taken. Every item of the 
securities upon which the advances are made is carefully passed upon 
by the responsible management of the bank. So far so good. But the 



150 PRACTICAL BANKING. 

notes have no sooner passed into the loan of the bank than there begins 
in very many cases a series of changes of collateral. The pledgors, in 
the regular course of business, often sell portions of the original 
collateral from time to time, and then they withdraw these marketed 
portions and in their place substitute new purchases which they have 
made. Before the loan is finally settled the collateral has in very 
many cases been so completely changed as to be entirely unlike that 
which was pledged at the start. In some banks I fear an insufficient 
supervision is indulged in by Managers, Directors, etc., in regard to 
these changes. The details are attended to by the officers of the 
discount department, and as the collaterals themselves are often left in 
the hands of these officers, it is very natural to slide into easy-going 
habits regarding this business. Old collateral is often delivered and 
new collateral taken on without that careful consultation with Managers 
which the situation demands. To obviate this difficulty a book should 
be kept whose special work should be that of presenting a clear and 
detailed record of all the changes in question made the moment the 
changes are made. This book should be constantly open to the inspec- 
tion of the Manager and Directors, and they should be expected to make 
their check marks of recognition and approval of these current changes. 
RESPONSIBILITY FOR COLLATERALS. 

He borrowed fifty thousand dollars from a bank, leaving with the 
bank as collateral security seventy-five thousand dollars in the bonds 
of a solid railroad. He was an experienced and very heavy borrower 
of call money of banks, and always gave the best of security, taking 
from them large sums, and receiving from them the lowest current 
rates. The talk that was made upon this care of collaterals between 
this large negotiator and his bank, when the loan I have just named 
was made, well illustrates the situation of the matter in question, and 
I reproduce it, premising that, after this borrower and lender had their 
say, there was very little left to be said upon it. 

As the borrower passed over to the bank Manager his pile of 
collateral bonds the banker remarked, as he has many times before to 
the same borrower (for the matter had always been a point of pleasant 
contention between them), "I suppose you fully understand that we 
are not responsible for the care and safety of these bonds beyond the 
exercise of due diligence and carefulness as custodians — the exercise of 
the same care and diligence as we bestow upon our own securities and 
cash ? These bonds are your own property, left with us for your own 
convenience. If, after taking them on and looking after them they 
are burglarized or destroyed the loss is yours and not ours, for so the 
Courts have many times ruled, so says "Jones on Collateral," ki Morse 
on Banking," etc., and so rules custom, equity, and common law and 
common sense." 

This very strong and most decisive statement of the lender's side 
of the case was met by the borrower's declaration of views which 



THE BANK'S COLLATERALS. 151 

embodies about all that can be said. He simply remarked : "You 
have my property as a pledge for your money. I shall not pay your 
money until you return me my bonds, and I should like to see you 
attempt to force me to do so. If you take good care of the bonds 
you will not lose them ; and, if you do lose them, I shall hold you 
responsible — shall take the ground that you have been careless, your 
employees dishonest, your vaults insecure, or something of that sort, 
and in that event I shall not pay my note, Jones or no Jones, law or 
no law, to the contrary notwithstanding. " 

And this is where the matter rests. There have, fortunately, been 
few actual contentions in this field, and when they do come up the 
battle will be over circumstances indicated in the discussion quoted. 
COLLATERAL VERSUS PERSONAL SECURITY. 

Many private capitalists and some banks and bankers who are in the 
business of buying paper and making loans prefer to make advances 
upon purely personal security rather than upon paper accompanied 
by coDateral, especially coupon bond collateral. Their reason for 
this preference is found in the fact that they dislike the care and 
responsibility involved in holding this last-named class of collateral,, 
or any collateral the loss of which would cause them serious trouble. 
Whatever may be the character of the legal theories advanced there is 
not a shadow of a doubt but that any promisor who found the bonds 
he had pledged with his promise not forthcoming when, at the maturity 
of his promise, he made ready to pay his note, would refuse to make the 
payment and would demand his collateral before making a settlement. 

Many heavy buyers of paper — investors who have for a long series 
of years made a practice of putting all their funds into notes and 
acceptances — have had so strong a prejudice against bond collateral 
that they have never touched paper thus fortified. 

But there are large investors and loaners of a different opinion, and 
as the institution of safe deposit companies has greatly facilitated the 
business of handling collateral loans, they find quite a good proportion 
of their patronage coming from private capitalists who use them for 
the storage of bonds, etc. , upon which they have made advances. 

I hope no bank officer will pay so little heed to what I have written 
regarding the safe-keeping of valuables as to find a question of loss 
giving a vital interest to the following regarding the finding of property : 

In Massachusetts, the law in regard to the ownership of property found in a shop* 
office, etc., is as follows : 

If the property is in such a position as to indicate that it was placed there volun- 
tarily and then forgotten and left, as, for example, if it is found on a table, counter,, 
or desk, the store-Keeper, bank, etc. (as the case may be), is entitled to the possession 
as against the finder. 

But, if the property is found in such a position as to indicate that the owner never 
intended to place it there— for example, on the floor— the finder is entitled to keep it* 
as against everybody but real owner. (Mc Avoy vs. Medina, 11 Allen, 548 ; Bridges vs~ 
Hawksworth, 21 L. J. Q. B., 75.) 

This is subject to the statute provision by which the city or town in which tho 
property is found is entitled to one-half its appraised value. ( P. S. Mass., c. 95.) 



152 



PRACTICAL BANKING. 



I end this chapter by presenting an ancient Boston bank collateral 
form of note (see Form 34), the original of which is in the collection 
of antiquities belonging to Hon. Robert Black, of Brooklyn, N. Y. : 




m^m 



BOSTON, ^/^yffu — 181 3 . For value received, <2s promise to 
gay JOHN* P. CLARK, Esg;. Cashier of the State Sank, or to his successor 
or successors, in/that office, or to his or their Order, at the State Bank in 

Boston, (^$£zcS J^c^u^U? 

Dollars — Cents, inferf^%/^-e*^ days from date, and grace. 



Dollars, paid me by JOHN P. CLARK, Es<j. 







KNOW ALL MEN, THAT I 

in consideration of 



Cashier, of the State Bank, do hereby sell, assign and transfer to him and to his successor* 
in that office, all my right and title to 

to have and to hold the same, to him and his said successor," as collateral security", forth© 
payment of the note above described, which note has been discounted at said Bank, and tbd 
same Stock is to remain deposited in the office of said 'Bank, and.in. case the same note 
shall not be paid in three days from the time it may become due, or in case the same 
sum, or any part thereof should again be discounted at said 'Bank, the same - note shall, 
remain as security for the repayment of any sum, which may be discounted thereon, and 
if the sum so discounted shall not be paid when the same becomes due, from time to 
time, then I agree that the said Cashier may cause the said Stock to be sold, either at 
public or private sale, and the proceeds thereof may applyin the payment of the above 
described note, and after deducting all charges attending such sale, the overplus, if any 
there be, shall be passed to my credit at Jie State Bank, and remain subject to my order, 



Bostoit, 



181 



Form 34. 



BONDS AND COUPONS. 153 



CHAPTER IX. 

BONDS AND COUPONS. 

Negotiable bonds are simply negotiable time paper, bearing interest 
and passing by delivery. 

A first mortgage coupon bond of a railroad or any other corporation 
is a time mortgage note, the coupon being a convenient form for paying 
and endorsing the maturing interest. Printers and engravers have in 
these modern days exhausted themselves in the work of giving corpora- 
tion bonds an impressive and attractive appearance, and lawyers, 
trustees, treasurers and boards of finance have covered some of them 
with forms restrictive, qualifying and explanatory; yet, after all, they 
are simply the corporation's promise to pay, with interest, at some future 
day a sum of money. , 

Investors are sometimes heard saying of some homely, cheaply 
printed, pictureless bond, issued by some economical interior town or 
city, that it must be a pretty good bond since it looks so poorly. This 
way of talking expresses a prevalent re-action against the practice of 
making picture-book styles of coupon bonds — a re-action which has in 
a measure been fostered by the fact that many of the most showy 
bonds ever thrown upon the market have, in the end, been of value 
only as wall paper. 

In England I found bonds were quite generally termed debentures ; 
but the debenture of our Stock Exchange is simply a corporation's 
unsecured promise to pay — only a certificate of its indebtedness. 

The word coupon is from the French word couper, to cut. These 
little cut-offs, which are really nothing more nor less when surrendered 
than an interest receipt on a time note — a substitute for a semi-annual 
or quarterly endorsement of interest paid — are, as their name indicates, 
a Continental importation. They have been in use with us only a 
comparatively short time, and many a banker who reads this without 
glasses can recall the time when coupons were not in existence — at any 
rate not here. 

But now the little, easily lost and readily negotiated coupon, whose 
disappearance amounts to so much cash, since it is good in any honest 
hand, and, practically, is incapable of being stopped, is here to stay 
and has come to be one of the most troublesome vouchers the bank 
officer is called upon to handle. They are a convenience ; but, viewed 
in some respects, are what may be termed a great trial and nuisance. 
They are always losing and mislaying themselves, and to lose one is 



154 PRACTICAL BAjS t KI^G. 

like losing a gold dollar. It is easy to say that, as a voucher, they are 
too small — not big enough in paper, yet they are so numerous one 
would hardly dare to propose that their size should be increased for 
fear they would be monopolizing too much room in the Teller's cash, in 
Messenger's wallets, and Treasurer's vaults. The mere work of cutting 
them from the debentures held by some of our great bond owners is so 
tedious that nothing but the consciousness of full proprietorship in 
every one detached can make such coupon-clipping other than the most 
wearisome drudgery. 

Regular coupons, payable, as they usually are, to bearer, at a 
specific date, carry grace. Here is the common form in question (see 
Form 35), the very coupon upon which a suit was based, which evolved 
the final decision, still standing firm, that such coupons carry grace : 



• s '- ; - 7 - The Indianapolis, Bloomington & Western Railway Co. 




will pay the bearer, at its Agency in the city of New York. 




.thirty-five 


dollars in gold coin, on the first day 


of 


April, 1871, 


for semi-annual interest on Bond No 




\ 


(Signed,) 

A. P. LEWIS, Secretary. 



Form 35. 

Interest warrants do not carry grace. Here, too, is the form (see 
Form 36) of the very interest warrant which was in suit when the no 
grace decision was reached : 



$35. INTEREST WARRANT. 

for tllirty-five Dollars, upon Bond No of the 

DANVILLE, URBANA, BLOOMINGTON & PEKIK RAILROAD GO., 

payable at the office of the Farmers' Loan & Trust Co., in the city of 

New York, April 1, 1871. 

L (Signed,) 

W. J. EMENTROUT, Secretary. 



Form 36. 

Government coupons may be collected at any Sub-Treasury of the 
United States without the identification of the bearer. Collectors of 
registered Government-bond interest must be identified, and owners of 
registered bonds of the older issues for which interest checks are not 



BONDS AND COUPONS. 155 

sent out can only collect their interest at those Sub-Treasuries where 
they have, in registering their bonds, requested that the United States 
Treasurer should make their interest payable. Coupon bonds are good 
in the hands of an honest holder, and he can hold them, and collect 
their coupons, all caveats and stoppages of payment to the contrary, 
no matter if they have been stolen a dozen times and can be positively 
identified as many times by honest parties from whom they had been 
stolen after honest purchase in the open market. 

Patent coupon cutters, of cunning device, have been invented. I 
have examined and tried many. The best of them are good workers, 
on some bonds, when the bonds are in fitting shape and order. But at 
tunes the best coupon cutter ever planned must give way to what may 
be termed the hand-picking process — the simple cutting of one coupon 
at a time with a pair of scissors. 

REGISTERED BONDS. 

If a holder of registered bonds loses his certificate, he has only to 
notify the Treasury Department of his loss in order to protect himself 
against all trouble, for the bonds will not be available to any other person 
unless transferred by the original holder. In case of the destruction of 
registered bonds, by fire or otherwise, the loser can procure from the 
Treasury Department new certificates by presenting proof of the 
destruction, the usual guarantee bond, and a full description of the 
marks and numbers of the missing certificates. 

There is one point about the transfer of registered bonds that should 
be carefully borne in mind. The certificate of transfer upon the back 
of these bonds is sometimes forged, and care should be taken, in 
purchasing this class of securities, to deal only with honest and 
properly-identified parties. They should never be bought of strangers 
or suspicious characters. 

And it is not well to hold registered bonds which have been 
transferred in blank — that is, to hold them as a permanent investment. 
The transfer should be made complete by transmission to Washington 
at the earliest possible moment. It is nearly as unsafe to hold these 
incompletely-transferred bonds as it is to hold coupon bonds. 

When these blank transferred bonds are purchased for re-sale, much 
risk may be avoided by at once filling up the blank with the name of 
the purchaser. When re-sold, a second assignment may be made upon 
the same bonds in the space left for that purpose. 

DESTRUCTION OF UNITED STATES BONDS. 

The United States must in the end profit largely from the destruc- 
tion, in various ways, of its promises to pay, which are so widely 
scattered in the shape of its Treasury notes, time bonds and other 
classes of vouchers. It will also, as I have elsewhere explained, reap a 
large harvest from the destruction of National bank circulating notes. 

The stated exhibits of the resources and liabilities of the United 



156 PRACTICAL BANKING. 

States Treasury, showing, as thef do, large items of uncalled-for 
interest and vast amounts of outstanding long past-due bonds, indicate 
the results I have pointed out. 

One can easily imagine the thousands of ways in which Government 
promises to pay are placed beyond redemption. They go up in fire and 
smoke, they go down in ships, they are worn out, lost and scattered in 
all sorts of ways. 

A single striking illustration of this point comes to mind. The 
young man came rushing into the office of a large dealer in United 
States bonds in great excitement. The situation was this. His father 
had suddenly gone crazy, and had deliberately thrown into a blazing 
stove $5,000 United States bonds bought of that very house. The son 
had entered the room where the work of destruction was going on just 
in season to see the ashen remains of the burnt securities. There they 
lay, clearly indicating what had been done, for the sheets of unbroken 
cinders could actually be read. The son had preserved these charred 
remains — in fact, had not dared to touch them, for fear they would 
crumble out of sight, but had kept them in the stove where they had 
blazed, and was carefully holding on to the stove. The Government 
l)ond dealer's only advice to the panic-stricken young man was to have 
the stove sent to Washington for redemption, and I have the impression 
that this was done, and that the United States finally paid for the bonds. 

But in how many cases are there losses of bonds without any sort 
of evidence — not even the ashes in the bottom of a stove — to prove 
their loss or destruction ! 

STOPPING PAYMENT OP BONDS AND COUPONS. 

Where bonds and coupons are not of the registered or (as Londoners 
term them) inscribed class their payment cannot, speaking in general 
terms, be effectively stopped. There are, of course, exceptions to this 
rule. Common law, custom and common sense demand that all persons 
shall exercise caution and transact business with their eyes open so that 
no opportunity can be taken advantage of to further schemes of fraud. 
It would be easy to imagine cases where judges and juries might hold 
purchasers of stolen coupon bonds or coupons liable for not exercising 
protective care and prudence in transactions incident to taking them. 
Whenever cases of tins character are brought into Court they are settled 
as far as practicable in accordance with the surrounding circumstances 
and the laws and customs governing in similar instances. 

Broadly stated, the ground taken in business and financial circles 
in regard to stopping payment of bonds and coupons is that so squarely 
assumed by the United States in its coupon transactions. The Treasury 
Department does not now attempt to caveat or stop payment of lost or 
stolen coupon bonds or coupons, or to assume the slightest responsibility 
in deciding questions of disputed ownership, but recognizes only the 
bearer as entitled to payment. Courts have decided over and over 
again that a coupon bond payable to the bearer is good in the hands 



BONDS AND COUPONS. 157 

of an innocent and bona fide holder who has obtained, it in an innocent 
manner by honest purchase at a reasonable market price, though the 
bond may have been lost by or stolen from another person. 

Bankers and general dealers in securities often buy and sell bonds 
which have been very extensively advertised as lost or stolen and their 
payment "stopped," and it is easy to see why this position regarding 
coupon bonds and coupons assumed by the Government, and which 
has been generally received as a correct one, is the only ground which 
can be deemed consistent with the exigencies of cases* likely to arise. 
The only practical way out of this stopping-notification business is to 
take no cognizance of the caveats. 

There is constantly falling a steady shower of notices of stolen 
United States bonds, giving all their marks and numbers and full 
particulars of the time and manner of their taking off by the thieves ; 
but these circulars generally go into the waste-baskets of the bankers 
and brokers receiving them. 

Not long ago a banker had in hand a large pile of coupon Govern- 
ments, fully identified as being the late property of an interior National 
bank, from which they had been masked-burglarized within a very 
short time by a party of the fashionable gagging vault-smashers of the 
period. The interview with the present holder of the wandering bonds 
was interesting, but not profitable, as far as the robbed bank was 
concerned. The new holder politely tendered all the assistance in his 
power to aid in the search for the rogues in the case, and offered to sell 
his bonds to their old-time owner at the lowest market prices. 

I have heard parties speculate, when receiving packages of hundreds 
of thousands of dollars in coupon United States bonds, as purchase or 
collateral, upon the number of times the bonds may have been stolen 
from somebody or another. 

It is absolutely impossible for the banks and bankers to compare the 
quantities of coupons which pass through their hands for collection with 
these lists of the marks and numbers of the stopped coupons, even if 
they attempted to preserve and keep the run of them, and the question 
is very like that of stopping Bank of England notes. Notices of such 
stoppages of payment are being constantly advertised in London papers 
and sent to the Bank of England. The Bank will pay all its genuine 
notes held by honest hands whether stopped or not. The only 
advantage of these notifications is the use which may be sometimes 
made of them in tracing back stolen notes to thievish hands. The 
Bank of England lends a hand in this work, for, when stopped notes 
are presented there full observation is taken by comparing them with 
the marks and numbers of the lists and notifications of the lost or 
stolen notes which are always kept at hand in the bank, and the 
presentor may be called upon to show where he received them. Outside 
of the bank the lost and stolen notes which have been "stopped," 
travel as well as any other, since it is utterly impracticable for the 



158 



PRACTICAL BANKING. 



public to make any discrimination. In this country, attempts have 
sometimes been made by large losers of coupons and coupon bonds to 
secure from banks, through medium of the express companies, receipts 
for notifications of stoppages of payment delivered them. Banks should 
not make such acknowledgments, since they must not concede that it 
is their duty to recognize any binding force in these notifications. 

HANDLING COUPONS. 
When dealers deposit their coupons at their bank they should care- 
fully list them. Here is a good form (see Form 37) of coupon deposit 
ticket or invoice : 



No's, on Coupons 


"Number 
of- Coupons 


Amount 
each Coup, 


Total Amount 


<7 / jl / W /- 


C^^OO 








/C^U^c6 ZUSa&J 




1 / 


/ 




. // 




/ / 


s 


/o 


$o3~0 




s7 /? * 










^u/i^c^^o, ~^Z^£^ 


vV%\ 








?-v&Xs// ■ jztxyo/tfj- 


'/6 


3tT 


tf&O 




' / / ■/'■'// 


y3 


/7& 


qSZ 


dTo 


/ 




/ 






^^a^. a: ^^^u^iu4Z 


^/a^ 








/<%£*£ - jZ* ^r/u-jL. • 










''//Of.' t?,2-ite. 










/ / 
62J2-70. > &^<7cT 










/ / / / , 
Y.<0, O^/ - /O&Cof 


/if 


^30 


^AJO 






V 




























s 


r 


/.//-^ 


(U~V^ 






( 







Form 37. 

Where coupons are cut from registered coupon bonds, and passed 
by the owner through the bank or other collection avenue, they must 
be accompanied by an order from the person in whose name they are 
registered for their payment to the collecting agent. 

The Treasurer of one of our States takes the ground that the coupons 
themselves must be endorsed with this order. But coupons have not 
a paper back which is roomy enough for such an endorsement or which 
was ever intended to be so used. 

The United States issues no inscribed coupon bonds. Its registered 



BONDS AND COUPONS. 159 

bonds are simply consols — couponless certificates, and the interest upon 
the same is sent to the owner in the form of a payable-to-order Treasury 
draft, the endorsement of which is the receipt which the registered 
holder gives for his interest. 

When banks send coupons away by mail, registered mail, or express, 
for collection, they should be carefully enclosed in marked, numbered 
and labeled envelopes. Here is an excellent form (see Form 38) for 
envelopes required for this coupon use: 



From 

FIRST NATIONAL BANK, of Chicago. 
coupons Chicago and Western Michigan Rway Ts. 

15 at 35 $ 525. - 
8 at 17.50 $ HO. = 
at $ 



Account of A. Hood, Trustee. $ 665. = 

Please enclose Coupons of only one Corporation in each Envelope. 



Form 38. 
A DEMORALIZING PRACTICE. 

There are bankers and others who see nothing wrong in under- 
valuing packages of bonds, coupons and negotiable securities forwarded 
by express which go through the money departments of these common 
carriers and receive the best transportation and protection that can be 
afforded. People who avail themselves of the services of an express 
company should understand distinctly that the practice we have in 
mind is not an honest one. The individual who deliberately marks a 
value of one thousand dollars on a package of ten thousand dollars in 
money or uninscribed coupon bonds and sends it by express from New 
York to Chicago on an express receipt and express charge for only 
a thousand dollars, is guilty of a deliberate fraud upon the express 
company. In doing this he undoubtedly argues with himself that it is 
all right, since the company cannot be made responsible to him in case 
of loss for more than the sum he has marked on the package, and which 
they have receipted for, and that he has only put upon them the risk 
and responsibility of the smaller sum for which he has paid. But this 
superficial reasoning does not by any means cover the point. Fairly 
stated, the express company may be said to have carried for him nine 
thousand dollars for which he has not paid, and they are deceived and 
defrauded by him to this extent. 

He has availed himself of all the facilities the company has at its 



160 PRACTICAL BANKING. 

disposal for the carriage in safety of valuable packages, and has not 
paid for the services he has received. 

Managers of express companies are justifiably indignant over the wide 
prevalence of this undervaluing practice. The Superintendent of one 
of the largest express companies not long ago declared that he would 
never take a package a second time from a sender who had been known 
to undervalue and underpay, without having the contents of the 
package shown to him before he receipted for it, nor would he deliver 
packages to such offenders without demanding a sight of their contents 
before he settled for their carriage. 

Not long ago coupons amounting to over $20,000 marked "no value \ 
were sent through an express company on a charge of fifty cents. The 
package was lost, and the most troublesome and costly complications 
arose as a consequence of the fraud. 

Undervalued packages sent by express to the United States Treasury 
are always reported at once to the express companies by the department. 



THE CASHIER. 



CHAPTER X. 

THE CASHIER AND HIS DUTIES. 

His general duties and responsibilities are well denned in the 
National Bank Act. His unwritten duties and responsibilities are 
those of which I propose to speak in this section. 

The bank Cashier is the chief executive and administrative officer 
of his bank. He represents the will of the President and Directors,, 
and sees to it that their will and wishes are carried into effect ; but , 
beyond this it is very important that he should never for a moment; 
forget that bank Cashiers are special and independent and responsible 
officers — chief executive officers — of their corporations, and not mere 
representatives and subordinates of Presidents and Directors. They 
are quite apt to gravitate towards the last-named view of their status 
— their situation and vocation — simply because they are chosen by a, 
Board of Directors and hold their positions, as it were, at their wilL 
Nevertheless they are, purely and simply, in all important points,, 
officers and representatives of the shareholders, and, looking to final 
results, the shareholders are the parties to whom they must, in case of 
stress, make final appeal, and who will, under all circumstances, hold 
them responsible for the faithful and proper discharge of their legiti- 
mate duties which are, as I have said, largely of an executive character, 
and clearly defined in the Bank Act, the common law of the United 
States, and the decisions of equity practice. 

The Cashier who would wish to be fully equipped for his place must 
be a constant student of his business. He must keep himself fully 
acquainted with the banking laws under which he is working, watching 
carefully every item of new legislation bearing upon his profession. He 
must read the reports of the cases in law, with the decisions reached, 
of those interesting banking suits which have had such an important 
bearing upon the work of defining the duties and responsibilities of 
bank Cashiers. In a word, he must make himself as thoroughly" 
conversant with the laws, customs and practices which have to do 
with his position as his time and strength will permit. It is a satis- 
faction to know that what may be termed the banking literature of the 
day is steadily placing within his reach classified information upon all 
points relative to his profession. 

It is the duty of the Cashier of a bank having many departments 
and a large corps of officers to see that all their work is well and 
promptly performed, and to give his attention to a general oversight, 



162 PRACTICAL BANKING. 

of the labors of his subordinates rather than to the personal discharge 
•of the details of any division of the labor that is going on about him. 
The Directors of the bank have a right to expect that he understands 
all about the business. They are supposed to give him all the help he 
needs. They hold him responsible for the good conduct and faithful 
-work of this help. The experienced and competent Cashier has little 
ambition to make loans for the bank, or to exercise an undue influence 
in the matter of extending credits of any description. He understands 
that the Board of Directors exists for that purpose, and, that if they 
<io their duty, they will attend to this loaning business. 

In the running of the complicated machinery of which he is the 
executive head and chief manager, he will find that a large share of 
Iris time is taken up in settling properly nice questions of action in the 
vast number of cases of practical banking which are brought before 
him by the heads of the various departments. He is expected to know 
the rights and duties involved in every case, and to decide safely 
and promptly on all matters at issue. Much of his time must also be 
consumed in holding audiences with dealers and the general public 
who for one purpose or another are often found calling upon ' ' our 
^ank." 

The Cashier ought to understand every book in his bank. There 
should not be a single entry therein which is not plain English to him. 
Jle ought, in fact, to understand all the methods and machinery of 
foanking ; or, at least, that class of banking he is engaged in. If at 
;any time he finds himself at a loss to comprehend any feature of it that 
presents itself, he should lose little time till he has studied himself into 
the desired knowledge. 

Many banks are making a mistake in requiring their Cashiers to 
serve as Discount Clerks. ' I am, of course, now only referring to large 
Tmnks, which need a large corps of clerks. It is not a good plan for a 
large city bank to combine these two offices of Cashier and Discount 
•Clerk in one, unless exceptionally light work and proper economy 
demand such a doubling up. 

He should have no other business on his hands but banking, and 
that banking, that of the institution under his charge. He should 
make up his mind, when he accepts his position and his salary, to be 
♦content therewith until he decides to make a change in some direction 
that may seem to him of advantage. He should not, by any means, 
be a speculator, even in the mildest way. The duties and responsi- 
bilities of his place are entirely out of harmony with private trade on 
his part of any description. And, in fact, there are not many Cashiers 
who., without doing injustice to themselves or to the institution under 
their charge, can find the time and strength to go into trade and 
speculation on their own account. Once out of the bank for the 
day, they will generally find it wisest to sink the shop and engage in 
^'recreations" of a very unbusinesslike character, such as out-of-door 



THE CASHIER. 163 

exercise, the enjoyment of pleasant society, books, art, music, and 
innocent and profitable hobbies of various descriptions. 

There is one delicate matter relative to a Cashier's duties that must 
not be overlooked. It is particularly incumbent upon him to see that 
all his officers treat every customer— dealer — who enters the bank with 
the extremest courtesy. And in his intercourse with his subordinate 
officers he should also present an example of that courtesy of manner 
which he wishes them to show in their intercourse with depositors, etc. 
A bank Cashier should never reprove, or find fault with, any of his 
clerks in the presence of customers of the bank; or, if it can possibly 
be avoided, in the presence of their fellow officers. 

In most of our banks these suggestions may not be needed. In 
exceptional cases they may not be out of place. 

I will add a few more words as to the relations between a Manager 
and his clerks. 

Their relation to each other should not only be harmonious, but 
should also be heartily co-operative — a word which I am here using in 
a sense which will need a little explanation. I mean to be understood 
as saying that that bank moves along best in the management of its 
methods and machinery, where superior officers and subordinates labor 
the most helpfully together towards one end — that end being the safe 
and successful administration of the affairs of their bank. 

Every Cashier should make it a special point to give his officers 
every practicable opportunity for learning, in the most thorough 
manner, the business they are following — should do this, not only for 
their own good, but for the good of the bank in which they are laboring. 
The more the officers are brought out — developed — so much more 
valuable they will be to their institution, and the more satisfaction they 
will take in their daily routine of work. Superior officers — Presidents, 
Cashiers, etc. — should understand that their own special duties will 
be lightened, and the general business of the bank facilitated, by the 
freest consultation with the men who are attending to the details in 
the various departments of their institution. 

There are points about which these subordinates can give the 
Manager much valuable information — or call it instruction — of a 
character which it will be difficult for him to obtain elsewhere ; and the 
superior officers place themselves at a great disadvantage when they 
show an aversion to receiving hints and suggestions from those under 
them. 

There is an old saying that two heads are better than one. Another, 
that two pairs of eyes are better than one. We might as well add to 
these saws another aphorism, which is, that two memories are better 
than one. 

Many a hard-pressed bank Cashier might realize the truth of this 
last expression, and profit by it, if he would utilize to the best advantage 
the talent that is working with him by leading his officers into a habit 



164 PRACTICAL BANKING. 

of looking with him into every important question of bank management 
that comes up in their circle of business, so that, when matters of a 
similar character again present themselves, he could have their intelli- 
gent co-operation in the settlement of difficult points. 

PRESIDENTS AND CASHIERS. 
The relations between these two officials should be of the most 
frank, cordial and agreeable character. 

There cannot be two heads of one bank; and where there is an 
active and capable working President, chosen for the purpose of acting 
as the head and front of the bank, and paid for that service, the Cashier 
of the same bank, no matter how able and experienced he may be, 
must consider that his role is very like that of a Lieutenant-Colonel in 
the presence of the Colonel. He must be content to play, to a certain 
extent, a subordinate part. In such cases the President and Cashier 
have each their well-defined and distinctive duties, and there is not 
the slightest need of any conflict of authority. What these distinctive 
duties are I define elsewhere. And, as these head officers move along 
together, spending the best part of their lives in each other's company 
and both giving their time and strength to the work of running the 
bank under their charge, they should endeavor, by the exercise of 
mutual patience, charity and manliness, to make their ways of life at 
the bank as agreeable as possible; and where the relations between 
President and Cashier are what they should be — where they each 
understand their duties, and aim to discharge them rightly — the official 
whom we have termed a subordinate in many respects may yield due 
deference to the position above him without giving up one iota of his 
self-respect or manly independence. In many points the position he 
holds is a more enviable one than that of the higher officer. He is 
called upon to shoulder less responsibility than that which must be 
assumed by the President ; and responsibility is something which men 
of the largest experience are the least fond of taking, since results and 
consequences are so often disappointing. 

The Cashier should carefully avoid carping and criticising remarks 
regarding the management of his President and Directors. It is about 
time for him to either reform or cut adrift from his bank if everything 
there for which he is not himself directly responsible is so managed as 
to lead him to spend much of his time in growling about the doings of 
his President. 

It is a very good rule for a Cashier never to say anything about his 
President's management which he would not like to have the President 
hear or would not be willing to say in his presence. 

And it is well for the President to adopt the same platform. 

Cashiers and Presidents, who are not in their bank life and work in 
the best of relations towards each other, lead a very unattractive 
business life. I have observed instances where a Cashier's steady habit 
of placing himself in a chronic attitude of mental hostility — dissatis- 



THE CASHIER. 165 

faction with his President and all his ways— has so reacted upon himself 
as to render him a most unpleasant and most unhappy man. 

THE SPECIAL DUTIES BELONGING TO THE CASHIER. 

Beyond the work and care described as devolving upon the Cashier 
there is a round of duties supposed to belong especially to his department 
and to which he is expected to give particular attention. 
HIS SIGNATURE. 

The Cashier is the chief representative of the bank in the matter of 
his signature. It is difficult for a bank to go behind it or do anything 
without it. Wherever he signs, in his official capacity, and within the 
limits of his authority, the bank is irrevocably held, and his authority, 
as banks have discovered in cases where they have contested his 
signature, is very wide. The limits set upon its binding power are quite 
well defined in several recent great legal contests — notably those in 
which Mellen, Ward & Mower involved the State Bank and Merchants' 
Bank, of Boston, and to which the United States was a party. These 
famous cases have been fully reported, and every student of banking, 
who wishes to follow further the point we have in hand, is advised to 
make a careful study of them. In these suits the late B. R. Curtis 
made some of the most valuable and interesting presentations of facts 
and arguments bearing upon the Cashier's signature powers. 

The Cashier of a bank signs, in connection with the President or 
Vice-President of the institution, all the circulating notes issued. If 
he does not do this in his own handwriting he does it in spirit through 
the hands of the printer, who stamps upon the bank bills the fac simile 
of his signature, of which the Cashier has careful custody, and which 
in its place, holds the bank fully responsible. 

Attempts have been made by the bank authorities at Washington 
to deprive banks of the privilege of printing their signatures upon bills ; 
but the condemnation of this practice by a Treasury Department which 
introduced and maintains the use of fac simile signatures on every 
variety of its own enormous issues is extremely inconsistent and has 
not been enforced. 

The National banks are everywhere in the habit of using these 
labor-saving and extremely convenient stamped signatures upon their 
bills. 

The Cashier signs the checks of a bank and affixes its endorsement 

where such is needed. He also signs all reports and returns made to 

the Government. In these cases the President may alternate. He 

signs, with the President, all cerijficates of ownership of the capital 

stock of the bank. 

THE CORRESPONDENCE. 

The Cashier of a bank is supposed to attend to all its correspondence, 
to send out all its letters, and to receive, open and reply to all letters 
addressed to the bank. If he does not do all this with his own hands 



166 PRACTICAL BANiaXG. 

and eyes, as he is likely to do where his bank is a small one and its 
correspondence comparatively light, he does it through his ' ' doubles " 
— his Assistant Cashiers and Corresponding Clerks. Where what may 
be termed the more mechanical part of this correspondence business 
is deputized, as is the case in large banks, the deputies who may open 
and answer letters would be deemed entirely remiss in their duties if 
they were to allow a single bank letter to come into or go out of the 
bank relating to anything not of the simplest routine character without 
both letter and reply being submitted to the Cashier. 

In some banks the rule prevails that the Cashier shall sign every 
letter that the bank sends forth. As I have hinted, this cannot be 
done where the correspondence is extremely heavy, and in such cases 
the matter should be compromised by the establishment of a system 
requiring him to sign or revise all letters of special significance. 

In the supervision and general conduct of the correspondence of a 
large bank, the Cashier who is ready to grasp at all short-hand processes 
will be quite sure to summon to his aid the stenographer and the type- 
writer. These two workers, if we may thus express ourselves, are now 
quite commonly combined in one person. The Cashier dictates to the 
stenographer, and the stenographer turns to his writing machine and 
makes ready thereon a fair copy of the dictated letter, submitting the 
same to the Cashier for his approval and signature. 
RECORDS AND BOOKS. 

The Cashier has generally the duty of recording all meetings and 
transactions of the Board of Directors, and this, of course, should be 
done promptly and with the greatest exactness. 

He also, no matter how large his bank may be, how extensive and 
complicated its business or numerous its departments, should under- 
stand and be closely observant of all the methods and machinery of 
the institution in his charge — should know all that is there being done 
and also just how it is being done. He should have the reins well hi 
hand, and know well all the ramifications of his route. At the opening 
of each day he should know just how his bank is situated and the trend 
of its movements. When the gate is shut at the close of the day's 
business, and the machinery ceases to run and the wheels to revolve, he 
should also know about where his bank stands. 

With this aim his book-keeping will be of a general nature and deal 
with the totals resulting from the work of the different departments. 

On page 167 is a form he may adopt with advantage (see Form 39). 
In a few moments of each day he can cast his eye over the principal 
books of his bank and from them collect what may well be termed 
thermometrical figures, and throw them into this shape — a shape that 
may be balanced into a result which will have, to him, an index-like 
character, and which will reveal to him at a glance the position and 
drift of his institution. In collecting these figures he should remember 
to go to original sources, as far as possible, and not to subidsiary books. 



THE CASHIER. 



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163 PRACTICAL BANKING. 

These figures might be all taken direct froom the Book-keeper, but 
they may be, and should be, gathered from the Tellers, Discount 
Clerks, etc. 

We here give, in detail, a full explanation of all these figures — an 
explanation that needs only to be brief, since the statements are so 
systematically arranged that they are easily understood. They are 
two consecutive days' work; an explanation of one is an explanation 
<of both. 

We have, under date of Monday, July 14, 1890, an abstract of the 
transactions of the bank on that day, with a schedule, showing in 
^detail and aggregate, the cash resources of the bank at the close of 
the day — a cash balance with which to start on the morning of the 15th. 

The debits of the day are as follows : 

Deposits : the gross amount of deposits taken from the Receiving- 
Teller's books, deposits of all descriptions for which depositors are 
.given immediate credit. 

Loan : notes discounted that have been paid. These figures from 
•discount department. 

Interest : money received for interest from all sources. This from 
the Paying-Teller. 

Exchange: money received from any direction as exchange on 
'Collections. Figures from Paying-Teller. 

Discount : the gross discounts of the day, or perhaps of the week, 
figured out of notes discounted by the Discount Clerk. This item 
taken from the Discount Clerk's books. 

United States Treasurer: remittances received from him in 
payment for bills remitted or mutilated National bank notes sent for 
:redemption. This item from Paying-Teller's-book. 

Circulation: new bank notes of the bank's own issue received 
ifrom Comptroller of the Currency. This item from Paying-Teller's book. 

Turning to credits, we have — 

Checks : this item from Paying-Teller's book, shows entire amount 
of checks paid during the day. 

Loan: this item the gross amount paid out for net of paper 
•discounted. The figures are taken from the Discount Clerk's book. 

Expense : this from Paying Teller's accounts. All bills paid in the 
•day — bills of every class, which are the incidental expenses of running 
the bank, such as salaries, stationery, fuel, etc. , etc. 

Interest: this may be rebates on prepaid discounted paper, or 
interest upon deposits. The item is made up of figures from Discount 
Clerk's books and the Paying-Teller's. 

Exchange : this from Paying-Teller's books ; costs of collections 
made, charges on foreign paper. 

Dividends: this, dividends paid in the day. The dividend was 
declared in April, and the present current payments are slow and 
small. The bulk of them have been called for earlier. 



THE CASHIER. 169 

United States Treasurer: this, cash sent to him for new small 
legal-tenders, or something of the sort. 

Circulation : notes of the bank's own issue, retired in any way. 

The schedule of cash on hand, on the extreme right, is just what 
it appears to be. 

The figures of the gold and silver and legal-tenders of the bank, 
which are held by the Cashier, and not supposed to be in immediate 
current use by the Tellers, appear first. This cash is in the Cashier's 
vault, and is by him passed over to the Paying-Teller as he may need it. 

Teller: $286,611.62. This is the cash assets of the bank, beyond 
those just named, of all sorts — mainly Clearing-House checks for next 
morning's settlement, legal-tenders, gold and silver. 

THE OFFICE AND VAULTS. 

The Cashier has in his particular charge the banking rooms which 
the institution occupies. If they are owned by the bank he sees that 
they are kept in proper repair, that the taxes and other dues upon them 
are discharged, and, if portions are underlet, attends to their rent 
contracts and collections. If the bank is simply a tenant he attends 
to the matter of lease and rent payments, and looks after the landlord 
in regard to repairs that may be needed. It is his duty to see that the 
rooms are properly equipped for work, kept in order and neatness, that 
his officers are supplied with room enough for the work in hand, that 
they have the needful supplies for their departments, and as good 
light, ventilation and general working comfort as can be afforded, and 
that the officers who are by the nature of their duties best accommo- 
dated by being placed near each other have their locations thus 
arranged. He is bound to see that the dealers with the bank and the 
general public that patronizes it are supplied with necessary accommo- 
dations, and what are termed the public desks and counters kept in 
comely order and supplied with the necessary stationery. 

The vaults and strong rooms of the bank are in the special custody 
of the Cashier. It is his duty to see that the bank is supplied with 
accommodations of this class of approved and reliable character, and 
that they are kept in the best condition. If he does not personally 
lock and unlock his vaults he is expected to see that these matters are 
most carefully attended to, and to be extremely cautious in deputizing 
work of this character, for he is by the nature of his office held 
particularly responsible by the stockholders for the care of all the 
cash, securities and other valuables of the bank. 

HOW DO YOU STAND? 
Of a similar character to Form 39 but taking a slightly different 
place in the machinery of management and aiding the Cashier to keep 
up the closest acquaintance with the business movements of his insti- 
tution is the form here presented (see Form 40) — a form of a hasty, 
wholesale sort of a memorandum, made to aid the memory of the 



170 



PRACTICAL BANKING. 



Cashier as he moves through the work of a single day. This little 
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THE CASHIER. 171 

Here we have, in round, outline figures, the condition of the bank 
at the beginning of the morning's business — a brief statement of its 
resources, maturities for the day, the amount of its loan, clearing, 
deposits, reserve required, debts, reserve on hand, etc. , etc. And here, 
also, is a statement of some of its most important transactions during 
the day covered by this little sheet — a sheet which is an actual tran- 
script of one that has done regular service in a large bank. The bank 
which is represented on this sheet is located in the Clearing-House 
city of Boston. 1 

In illustration of the uses of the card it should be noted that, by its 

aid, the Cashier can, without hesitation, answer questions such as these 

— questions which are constantly being levelled at him : What did you 

send in to clearing ? How did you come out at clearing ? How does your 

loan stand ? Have you New York funds to sell ? Do you wish to buy 

New York funds ? What is your loan ? What your reserve ? Can you 

let us have some National bills ? Do you want any small bills ? How 

much are the banks owing you ? What are your maturities to-day ? 

etc., etc. 

THE CIRCLING YEAR. 

The Cashier's routine duties are so varied, so irregular, and so 
numerous, that any hint which I can give that shall aid him in his 
endeavors to discharge them promptly and certainly will be of a deal 
of practical value. Here is a suggestion : 

Let him have prepared and kept constantly on his desk a little 
book which he may term his agenda — a vade mecum which shall always 
be near him to prompt him and remind him of matters which must be 
attended to in due time. I have had prepared for my own use such a 
book as this; and, having found it a most invaluable practical aid, 
I will describe it and its workings so that other Cashiers may avail 
themselves of the plan. 

It is a well-bound little volume, about 7 inches by 6, and 1 inch 
thick. The first part is indexed by months, and in each division of 
months there are pages enough to supply lines to represent each day 
in the month. At the end of the monthly indexed portion of the 
volume are a large number of pages which are indexed by subjects. 
The indexing is done in the ledger index style — that is, by cutting 
notches in the book. 

Now for the way the little agenda book is to be kept and worked. 

Bear in mind that it is a book to remind a Cashier of things to be 
promptly attended to — that must be done from day to day ; a book that 
is to jog his memory. First let me give you a diagram of the book — 
a sort of picture of its exterior (see Form 41 on page 172), and a 
specimen page of its interior (see Form 42 on page 172)— showing first 
the manner of its indexing and then a part of the record for March. 

Each morning the Cashier may turn to the proper month, and, 
glancing down its page see what is to be attended to ; see whether there 



172 



PRACTICAL BACKING. 



1 


January. 


February. 


March. 


April. 


May. 


June. 


July. 


August. 


September. 


October. 


November. 


December. 


U. S. Bonds. 


Int. Cont's. 


Instructions 
& Contracts. 


Rooms & 
Vaults. 


Expenses. 



Form 41. 



March. 



15 



Dividend Book to be written up and checks ordered. 



Blanks for Directors for meeting's for examination and dividend to l>e 
prepared. 

Advertisement of dividend in two papers. 



Report of dividend and earnings to Comptroller within 10 days from 
declaration of dividend. 



THE CASHIEB. 173 

are taxes to pay, returns to be made, collections to be sent off, share- 
holders' meetings to be advertised, or any one of the many score of 
things which a bank Cashier has to have attended to at just the right 
time. 

In the after part of the book, where are indexed all sorts of contracts, 
instructions, etc. , that are to govern him in his dealings with his cor- 
respondents, he finds recorded in detail a great quantity of matter 
which is invaluable, and which is so easy of access as to make the 
record a great comfort to him in the administration of his bank. 

A bank Cashier came to me in a disturbed frame of mind because 
he had forgotten to advertise his annual meeting in legal season. I 
could only tell him that he would have to call a meeting of his Directors 
and change the by-law — relative to the time of holding such a meeting 
— setting the time ahead far enough to permit him to try again to get 
in a legal advertisement of this annual meeting. If he had kept this in 
his Reminder Book he would have escaped all this trouble. 

I have known Cashiers to forget to pay their bank taxes at the due 
time, to forget various due returns to the Banking Department, to 
forget to collect Government interest when it matured — in fact, to 
forget all sorts of things which they would have properly attended to 
had they kept an agenda book instead of depending upon an over- 
worked memory. 

To aid in the preparation of such a vade meeum I will mention in 
their order some of the duties which should be entered. 

It is the duty of the Cashier to see that he receives all maturing 
interest due the bank from whatever registered United States bonds 
the bank may hold, and, in order to conduct this business safely and 
easily should have upon his vade mecum an accurate record of all these 
registered bonds, with a classified statement of their maturing interest. 

On the first of January, as well as on the first of many other months, 
the United States pays interest upon these bonds. 

In former times holders of securities of this class were obliged to 
call at the office of the United States Treasurer or of his Assistant 
Treasurers, there collect their maturing interest, and sign on the 
Treasurer's books a receipt for the same ; but the payments are now 
almost entirely made by direct remittances to the bond-holders of 
drafts on United States Sub-Treasurers. 

The opening of the year is a good time in which to make a settle- 
ment of all the outstanding bills against the bank for incidental 
expenses, and it is well to have an entry to cover that duty. 

The National banks are requirea by law to hold their annual meet- 
ings for. choice of Directors some time in January, the precise day to 
be fixed by the articles of association. A preliminary mention is also 
made in December. 

The Cashier of a National bank must see that his semi-annual taxes 
on the circulation of his bank are paid some time in the month of 



174 PRACTICAL BANKING. 

January and July. These taxes may be paid into any National bank 
a Government depository, or direct to the United States Treasury. 

The semi-annual return as to amount of circulation, which is else- 
where described, also comes early in January and July. 

The semi-annual dividends of many National banks are paid April 
1st and October 1st. In banks where payments are made at these dates 
the Cashiers find the last half of March and September well filled with 
special duties relative to preparations for the dividends. They must 
see that the shareholders' dividend book is duly prepared, that the 
regular examination of the bank which always precedes the declaration 
of a dividend is duly attended to, that a complete statement of the net 
earnings of the bank upon which a dividend is to be based is drawn up, 
and, when the Directors have declared the dividend, must duly adver- 
tise it, and finally report to the Comptroller the amount of dividend 
and earnings. 

Once a year, generally in the month of May, the Cashier must 
return, under oath, to the Assessors of the town or city in which his 
bank is located, a complete list of his shareholders, with the amount 
of shares held by each and their legal place of residence. 

National banks now quite generally assume and pay the tax on their 
shares ; but the list in question is necessary, so that the localities where 
their shares are held shall be duly credited for taxes paid upon them. 

The bank must keep a record of the names, residence and number 
of shares held by all its shareholders, and this record shall at times be 
subject to the inspection of all the shareholders and creditors of the 
association and also to the inspection of the Tax Assessors in the locality 
where the bank is situated. A copy of this list, verified by the oath of 
the Cashier, must be sent to the Comptroller of the Currency on the 
first Monday in July of each year. 

As the annual meeting, to be held in January, must be advertised 
at least thirty days in advance, the December memorandum should 
remind the Cashier to insert these advertisements in the papers. 

The Cashier is called upon not less than five times each year to 
make a return to the Comptroller of the Currency, on forms prescribed 
by him, of the condition of the bank. This statement, which gives in 
detail all the resources and liabilities of the bank, is called for at unex- 
pected times, and when called for must be at once made up and returned 
to the Comptroller. 

The Cashier must publish, in at least one newspaper in the place 
where the bank is located, an abstract of these returns to the Comp- 
troller, and forward to the Comptroller proof of such publication. 
Where there is no newspaper in the town or city where the bank 
transacts business, a publication of the abstract in a newspaper in the 
same county will answer the purpose. 

I have now given a hasty summary of the yearly round of the leading 
special duties of the Cashier of every National bank, a list which shows 



THE CASHIER. 175 

he has his hands full of important details that must be carefully 

attended to. To discharge the duties of a Cashier properly requires a 

clear head, a thorough acquaintance with the theory and practice of 

banking, unswerving integrity, patience and persistence, and the most 

systematic habits of business. The man who attempts to fill the 

position in question without proper qualifications places himself under 

the harrow. He who is well equipped for doing this Cashier work may 

do it comfortably and creditably, and may take his place on the harrow 

rather than under it. 

LIST OF DEPOSITORS. 

The Manager of a large bank, and one that has a long list of 
depositors, to which names are, of course, constantly being added, will 
find it very convenient to adopt a memorandum book, which shall be 
a compact indexed affair, containing, in alphabetical arrangement, a 
complete list of all the depositors of the bank, with their addresses, 
and other little bits of information about those not likely to be well 
remembered, which will show at a glance who they are, who introduced 
them to the bank, or any other points about them which shall aid in 
showing just who and what they are, in case of need. 

I have no need of presenting a form for such a book; the descrip- 
tion of it which I have given will enable any Cashier to get one up to 
suit himself. I have had in use for many years a book of this character, 
and I know that other Cashiers who have kept such a record have 
found it exceedingly useful. 

A CASHIER'S SCRAP BOOK. 

Every Manager of a bank should have about him, on the shelves of 
his bank and within immediate reach, a good banker's reference library. 

It would be rather impracticable for me to specify precisely what 
books should enter into such a collection, since their character must 
necessarily vary with circumstances and location. The large bank in 
the great city would be expected to have more of a library than the 
smaller institution in the interior. On the other hand it might be 
claimed that the city bank, located in the midst of vast libraries and 
liberally supplied with legal assistance, could move along without 
manuals and reference books which might seem indispensable to the 
country bank. 

I found in the leading cities of England splendid reference libraries 
located in their business centres — libraries that could be quickly 
consulted by their bankers and business men, and exhaustive in their 
resources. This idea should be adopted by some of our banks. 

Without attempting to mention in detail what books a bank should 
have and should not have, it may be well to say that it needs the Bank 
Act, the laws of its State, a good dictionary, atlases, the best work 
extant on the methods and machinery of banking, a judicious selection 
of periodical financial literature, a file of the report of the United 
States Comptroller and Treasurer, a classified list of names and loca- 



176 



PRACTICAL BANKING. 



tion of all the banks in the United States, with names of their officers, 
amount of their capital, etc., and a directory of the place of its own 
location, if such exists. 

Beyond this simple catalogue lies a large field from which selections 
of bank reference books may be made as means and circumstances 
demand. 

I had particularly in mind, in opening this paragraph, a suggestion 
regarding the advantages of a scrap-book to a bank Manager — a 
neatly arranged and, if possible, indexed collection of printed selec- 
tions gathered from papers, periodicals and circulars, treating directly 
upon the Cashier's profession and work, and of a character not to be 
obtained elsewhere. 

The alert Cashier is often calling to mind the fact that he has seen 
and read somewhere something relative to a difficult point which is 
confronting him, and he wishes he could recall just what that some- 
thing was. This scrap-book might help to fill this mental gap — bridge 

this lapse in memory. 

PAYING DIVIDENDS. 

A few hints relative to this matter may be of interest and value. 

Here is a good form (see Form 43) for a Dividend Book — the book 
where shareholders sign the receipts for their dividends. The headings 
and items on this form are so clear that they need no explanation. 



We, the subscribers, acknowledge to have received of the FIRST NATIONAL 
BANK, of Wellsley, a Dividend of the sums severally set against our respective 
names, being Dividend No. — . 



Names. 



Adams, T 

Brown, Walter 
Crossman, Jno. 
Lyon, Robert.. 
Morse, Richard 
Nowell, Wm... 
Patterson, Jas. 
Pinkham, Wm. 
Sabin, Frank . . 
Wiley, Chas.... 





■40 




^1 
4 




Date. 


19 


57 




1889. 
Oct. 1 


30 


90 




Oct. 12 


5 


15 




Nov. 15 


15 


45 




Nov. 1 


16 


48 




Dec. 12 


12 


36 




Nov. 15 


32 


96 




Oct. 19 


25 


75 




Dec. 12 


17 


51 




Dec. 24 


20 


60 




Oct. 26 



Signatures. 



T.Adams 

Walter Brown 

John Crossman 

Robert Lyon 

James Brown (per order) 

Wm. Nowell 

Jas. Patterson 

Wm. Pinkham 

John Sabin (per order).. 
Chas. Wiley 



Residence. 



Roxbury. 

Taunton. 

Washington. 

Dorchester. 

Richmond. 

Urbana. 

Worcester. 

Manchester. 

Boston. 

Chicago. 



Form 43. 

The semi-annual dividends of our banks are usually made up, 
declared and advertised a week or two before they are made payable; 
and there is, therefore, ample time, meanwhile, to write into this book 
the amounts and rate of the dividend. 



THE CASHIER. 17T 

The filling in of the names and the number of the shares is work that 
can be done in advance of the declaration of the dividend. And as this 
is plain work, that should be done in a most neat and correct manner,, 
it is well to start on it early, so as to take it comfortably and do it 
properly. 

In paying dividends at the counter of the bank, it is, of course., 
impossible for the Cashier, or his deputies, to know — to identify — all 
his shareholders, for they are in part a changing throng, owing to the 
transfers of shares that are all the time going on. 

But I am sure that few have any idea how well the experienced bank; 
officers are able to identify a large proportion of the shareholders, and 
representatives of shareholders, who make these semi-annual calls. It 
is this remembrance — this identification — which makes the disburse- 
ment so easy and safe. 

And here is a hint of value : Do not let the Dividend Book lie around 
too publicly — too free for the inspection of any outsider who may drop 
into the bank. Any banker will see the grounds for this caution. 

In paying out your dividend checks be very careful to give the right; 
persons the right checks ; for mistakes of this kind cause much bother, 
and may lead to losses. 

After the first rush of paying a dividend is over it is well to read off 
by the Dividend Book the checks remaining on hand to see that no 
errors have so far been made ; for an early discovery of any mistakes 
of the character just named will render it much easier to rectify them. 

The Cashier must see that his lawful money reserve is well up to 
the requirements of the law when the bank makes a declaration of 
a dividend, for all declarations of dividends are forbidden when this is 
deficient. Within ten days after the declaration of a dividend he must 
report to the Comptroller of the Currency the amount of the dividend 
and net earnings in excess of the dividend. This report must be attested 
by the oath of the President or Cashier. 

To-day very many corporations are mailing all their dividends; and 
the number of companies adopting this mode is constantly increasing. 
The large railroads were the first to use this mailing method and the 
banks are rapidly following suit hi the matter. 

The custom has its advantages, and disadvantages. One of its dis- 
advantages lies in the fact that it deprives the Cashiers of the banks of 
the pleasure of once in six months seeing the faces of a large proportion 
of their shareholders. 

In carrying out the mailing plan permanent orders for sending 
dividends by post are filed with the company, specifying that they 
shall be so sent until otherwise ordered. 

In mailing the dividend checks a printed form of letter may be 
advantageously used. 

The following form (see Form 44) is used by the Chicago, Bur- 
lington & Quincy Railroad Company. Probably no railroad has a. 



178 PRACTICAL BANKING. 

better system of administering the details of its office affairs than this 
company : 



Chicago, Burlington & Quincy Railroad Co, 

ASSISTANT TREASURER'S OFFICE. 

nsro. 49 SEAES BTJILIDinsra-- 



Boston, December 15, 1890. 
As requested in a permanent order on file in this office, I inclose 
herein my Check to order, on the Merchants' National Bank of this city, 
for the amount of Dividend of Two Dollars ($2.00) per share, payable 
this day on Stock as of record November 21, 1890. 

Yours truly, 
E. E. PRATT, Assistant Treasurer. 



N. B.— Notice of any desired change of address must be sent me AT LEAST TEN 
DAYS before the Dividend is payable. E. E. P. 



Form 44, 



THE STOCK — ITS OWNERSHIP AND TRANSFER. 179 



CHAPTER XI. 

THE STOCK— ITS OWNERSHIP AND TRANSFER. 

The National Bank Act in its present form requires that the shares 
of a National bank shall always be of a par value of one hundred dollars. 

But Section 5154 of the United States Revised Statutes provides 
that the shares of any bank organized under State law which may 
become a National bank may continue to be for the same amount as 
they were before the conversion. This is the statute under which, for 
illustration, the Old Boston National Bank, of Massachusetts, has until 
recer ^y kept its shares at a par value of $50 and the Massachusetts 
national Bank at a par of $250. 

The majority of the old State banks which had, previous to their 
reorganization, their par values at over or under the $100, which is so 
universally the standard value, ranged themselves on the $100 line 
when they reorganized by scaling up or down as their previous situation 
might demand. 

The old State Bank, of Boston, had, for instance, a share par of $60 
at the time of its reorganization, which par they changed to that of 
$100 at the new start under the National law. 

It is so universal a custom in this country to make corporation 
shares of the par value of the round $100 that it is rather better for 
the banks to follow this way of rating. 

Shareholders, writers of financial articles and of financial statistics, 
in the way of reports of dividends, scales of earnings, etc. , are, by such 
a uniform arrangement, saved much trouble, and enabled to make 
their tables and statements much simpler and clearer for their readers. 

All the stock of the bank is represented by certificates, each of 
which is filled out in the name of a stockholder, stating that he is 
the owner of a certain number of shares, and is signed by the President 
and the Cashier of the bank. The form given (see Form 45 on page 
180) is practically that of all bank stock certificates. 

The issuing of these certificates, and their cancellation when they 
have become void through transfer of the shares they represented, is 
a business demanding the exercise of the extremest caution and care, 
and I give on page 182 a form of record book which will be of great 
help in systematizing this work. 

The pages of this form (see Form 46 on page 182) are actual copies 
taken bodily from a book which has been in use in an orderly National 
bank, the only change made being an insertion of fictitious names in 



180 



PRACTICAL BACKING. 




Form io. 



THE STOCK — ITS OWNERSHIP AND TRANSFER. 181 

place of real ones, which might not be pleased to see themselves used 
publicly. The model presented is of so clear a character as to need 
little letter-press explanation. 

The transfer officer enters upon the left side of this book every 
cancelled certificate at the time it is withdrawn by a transfer. On the 
right he records a full description of every new certificate issued. 

At times, but probably not often, in a large bank making many 
transfers, the footings of the two sides of this book will balance. 

Generally the record of certificates issued will be less in amount 
than that of certificates cancelled, for the reason that shares have been 
transferred to parties who are not ready to take out the new certificates. 
This unreadiness generally arises from the fact that they are proposing 
to buy more of the stock, and prefer to wait and take out one certificate 
covering their entire purchase. This difference in the two columns is 
carried along on a memorandum, kept on a separate sheet, or on a page 
at the back of the book, which memorandum shows what certificates 
are ready to be made out, and issued, when called for by their owners. 

In using this book, the transferring officer takes it, with every certifi- 
cate to be issued, to the President, whose signature is required to make 
the certificate complete ; and, when the President affixes his signature 
to a certificate, he checks it off on the record. 

The President does not sign an issue until it has been previously 
signed by the Cashier; for the signature of this latter officer is his 
guarantee that it is issued correctly upon transfers that have been duly 
made. A final use of the book is made when the President has checked 
off by its record all cancelled certificates. 

In issuing certificates of shares the utmost care must be taken to 
fill them out absolutely correctly in every point. Write the names of 
the parties to whom they are issued fully, and never indulge in initials 
in place of the first Christian names, or in the use of pet household 
names, where ladies are the holders, placing, for instance, Susie for 
Susan, Bessie for Elizabeth, etc., etc. 

I do not think it best, either, to insert the place of the shareholder's 
residence in the body of the certificates. Certificates live long. Resi- 
dences are often changed. 

In issuing stock certificates to trustees, executors, or administrators 
some description of the trust or the names of the parties or estates for 
whom executors are acting should always be inserted in the certificate. 

For illustration, no certificate should read in this way: "Robert 
Smith, Trustee, is the proprietor of ten shares in this bank;" it should 
read, "Robert Smith, Trustee under the will of James Smith, is the 
proprietor of ten shares in this bank." 

An executor receiving a certificate should find it reading, not simply 
William Robinson, Executor, but William Robinson, Executor of the 
Estate of . 

And not only in the stock accounts, but in opening deposit or other 



182 



PRACTICAL BANKING. 




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Form 4(T. — 



THE STOCK — ITS OWNERSHIP AXD TRANSFER. 185 

accounts with trustees, executors and administrators, mention should 
always be made of the parties or estates thus represented. 

In former times it was quite a common practice to issue certificates 
and to open accounts without making the supplementary specifications 
I have here recommended. Points made by recent legal decisions, as 
well as the knowledge of abuses that have crept in under this practice 
of not naming the estates and parties acted for, have led to the very- 
general adoption of the custom. 

One of the abuses, or rather irregularities, in vogue in times whert 
anybody was permitted to take out certificates from banks or to open 
accounts with them in the simple form of ' ' trustee " without any state- 
ment of the character of the trust was this: Individuals would, for 
various reasons, give in their names in the transactions in question as 
trustees when they were not really trustees for anybody or anything 
— often doing this simply for the purpose of making some division of 
property of which they were themselves the owners or for the purpose 
of concealing the ownership of money. A serious complication arising 
out of this method was the difficulty of moving the trust at the decease 
of the party who had thus fictitiously written himself as serving in the 
capacity of trustee. 

In delivering to the new holder certificates of shares it is always very 
desirable that they should be passed over direct to the owner, or his- 
duly authorized representative, and a receipt for the same taken upon 
the margin or stub of the stock certificate book. The next best course 
is to send the certificate to the owner by express, and affix the receipt 
obtained from him in this way to the margin named. 

Banks have a justifiable reluctance to send certificates of shares by- 
mail, though they are often requested by owners so to do, since the loss 
of an original certificate is often a source of danger, and always a source 
of a deal of trouble. 

If transmission is made by mail only the registered mail should be 
used ; for, under the methods of the registered system, the valuables 
thus traveling are put into pouches in the presence of witnesses, are 
transmitted under specially prepared locks, and are delivered to- 
owners in person on their signing a receipt for them. But it should 
always be remembered, in considering the value of the registered mail 
system, that the Gfovernment assumes no responsibility for carriage of 
registered mail matter beyond the exercise of due diligence and main- 
tenance of the stated routine safeguards. 

In cancelling the old — the retired — certificates it is well to draw 
across their face emphatic ink-lines of cancellation and to cut from 
them a portion of their signatures. On these retired certificates entries 
should be made showing the date of their transfer and the page uporr 
the transfer book recording it. These are little points, but there is a 
right way and a wrong way to do everything. The right way to cancel 
a signature of a stock certificate by cutting it is not to cut it entirely 



184 PRACTICAL BANKING. 

out but to cut clearly into it, so that the voucher shall show positively 
that it has been signed even after the cutting has been made. It may 
Ibccome, in some instances, a matter of no little moment to be able to 
show that a given certificate was once duly signed, though it has long 
been withdrawn and cancelled. 

The form of certificate which we have given (see Form 45 on page 
180) is represented as cancelled, and with a stamped record of its 
transfer upon its face. It will be noticed that the signatures have 
been annulled, as we have advised, in such a manner as to leave them 
in a condition to be easily recognized. The stamp which has been 
affixed is a very useful form. It quite readily explains itself : 

STOCK TRANSFERRED AND 
CERTIFICATE CANCELLED 

Oct. 20, '90. Transfer 416. 

Record checked by S. S., PreS. 

The initials standing after the words "record checked by " are those 
of the President of the bank, who, under the system of retiring certifi- 
cates which we have recommended, makes a final supervision of their 
withdrawal and cancellation. 

TRANSFERRING THE STOCK. 

The transfer officer must first of all have the old certificate surren- 
dered into his hands. Then comes the question of the identity of the 
person who presents it for transfer and who claims to be the stock- 
holder named in the certificate. 

The mere possession of a certificate — the simple fact that a stranger 
lias it in his hand — does not warrant the transfer officer in making a 
transfer without an identification of the holder ; for, in case it should 
afterwards prove that the certificate had been stolen by the bearer, 
the bank making the transfer, without taking precautions to require 
an identification, would have reason to regret its careless action. 

"What may be termed an indirect identification may sometimes be 
secured by a comparison of signatures. 

The certificate holder, who may, perhaps, only represent the stock- 
holder through a power of attorney executed by the real owner of the 
certificate, may refer the transfer clerk of the bank to signatures on its 
dividend book as verification of his identity, or the identity of the 
signatures on his power of attorney. 

But positive identifications are much better than those based upon 
apparent similarity of signatures. And the greater experience a bank 
officer has with this matter of signature-making the less willing is he 
to place reliance upon these corroborations by signatures. 

If the person is known or becomes known to the bank, and his 
papers are correct, he is allowed to sign the form of transfer on the 
transfer book and the bank is then ready to fill out and issue a certifi- 



THE STOCK — ITS OWNERSHIP AND TRANSFER. 185 

cate to the new owner. The Stock Ledger will be posted from the 
transfer book and the record be thus completed. 

"We have so far supposed a simple case where all was clear and 
easily seen to be correct, but the variety of forms of ownership of 
stock result in many questions which have to be settled when transfers 
are wanted ; and in many cases transfer clerks feel great uncertainty 
whether they are doing just right or are taking risks which they ought 
not to take. 

Late decisions, notably that of Loring vs. Brodie and the Mer- 
chants' Bank of Boston, by which the Merchants' Bank has lost a large 
amount of money, and the rulings of Judge Aldrich, in the case of the 
Reading Savings Bank vs. The Metropolitan National Bank, of Boston, 
have added to the confusion of the situation and to the anxiety of the 
transfer officers of corporations. 

We wih look at some of these questions, and our statements shall 
be based upon decisions posted to the present moment of writing and 
safe to follow until some judge jumps over the fence and makes a new 
departure in the business necessary. 

First, the powers of attorney which are so common an accompani- 
ment to the certificate. 

Be sure, if possible, that the power is not a forgery. 

A bank in a leading city not long ago was victimized by a plausible 
scoundrel, who presented himself to the Cashier, holding in his hands 
a certificate of shares which he had stolen, accompanied by a power 
of attorney which he had forged, signature of witnesses and all, and 
requested a transfer which was unsuspectingly made by one of the 
most experienced Cashiers, whose bank, in suffering the loss which 
followed, can reflect with satisfaction upon the fact that the rascal 
has since been transferred to State prison. 

A witness to a power is not a legal or a business necessity, but it is 
sometimes a very satisfactory feature. Then, if the power is not one 
of the regular printed forms, the clerk will see that it is properly 
worded and really conveys the desired authority. An examination of 
the dates, not only of powers of attorney but of probate certificates 
and similar instruments, is always in order. 

I have known instances where transfers have been made under 
documents of this sort which had become valueless by various kinds 
of natural deaths. Powers of recent date are generally desirable, and, 
in some instances indispensable. 

Let us next consider the duties and responsibilities which are to be 
met when making transfers of stock held in a fiduciary capacity, or 
when the deceased holder is represented by administrators or executors. 

It is from errors or negligence in such transfers that trouble has 
generally come. 

In transferring shares standing in the name of a trustee examine 
carefully into his powers at the fountain head, and be very careful 



186 PRACTICAL BANKING, 

that the trustee does not leave the channels to which he may have been 
confined by the instrnment which gives hini his authority. See that 
he makes no transfer not in harmony with the common law or statute 
law governing action of trustees ; and every bank Cashier should be a 
good lawyer, as far as these premises are concerned, or else have a 
good lawyer at his elbow. 

An administrator is an officialappointed by the Probate Court and 
it is in the regular line of his duties to transfer any shares belonging to 
the estate which he is settling. It is only necessary for the corporation 
in which the transfer is to be made to demand of the administrator the 
probate certificate of his appointment, and to judge whether its date is 
sufficiently recent to give reasonable assurance that it has not since 
been revoked. Letters of administration are always sufficient evidence 
of an administrator's authority to make transfers. 

And executors stand in nearly the same position. Some corporations 
take the ground that it is not safe to allow the executors to make 
transfers without making an examination of the will. But recent 
decisions sustain the practice of those transfer agents who take the 
position that, in making transfers for executors, it is only necessary to 
see the probate certificate of the executor's appointment. 

An executor always has the right, of course, to sell and transfer 
property to pay debts of the estate in his charge. Where circumstances 
render it improbable that a sale is necessary for payment of debts or 
legacies, or that the transfer requested is a proper one the bank would 
not be justified in allowing it until it had consulted the will or was 
otherwise properly informed as to the circumstances. 

In the matter of transfers by guardians, it is safe to say that all 
that is necessary is that the corporation making the transfer shall 
have good proof that the parties representing themselves as guardians 
are really so. And, having probate proof of that fact, persons dealing 
with them in good faith will be protected. By virtue of their office, 
executors, administrators and guardians have extensive discretionary 
powers in managing personal property entrusted to them. 
A PROBATE EXPERIENCE. 

I had been duly shown the probate certificate, and the original 
certificate of stock was surrendered. Knowing well the parties to the 
proposed transfer, I had no hesitation in transferring the stock, which 
stood in the name of a dead shareholder, to the name given me by the 
executor of the will of the deceased owner. Everything in the case 
seemed clear and in regular red-tape form. Six months after, I was 
notified by the executor who had made the transfer in question that 
everything had gone wrong in the matter— that a will of later date 
than the one under which he had innocently moved as executor had 
been discovered, probated by the Court, and was the will now duly 
in force. The same executor was named in both wills; yet, as this 
executor wrote, the transfer I had made was null and void, having 



THE STOCK — ITS OWNERSHIP AND TRANSFER. 18? 

been made without due authority. But in this case it fortunately 
happened that the new will was so nearly like the one which had been 
incorrectly probated that the executor of the new testament found it 
perfectly easy to guarantee and confirm the first transfer. Had there 
been radical differences in the two wills the situation might have been 
embarrassing. 

Points of great interest and importance are the outcome of just 
such cases. Common and statute law require that wills shall be pre- 
sented for probate within a certain named reasonable time, and duly 
advertised notice is given to all concerned to show reasons, if any 
exist, why the wills that are offered should not be accepted and allowed 
a probate. When these forms are gone through with, probate allowed, 
and certificates of same granted, the banks readily proceed to act under 
such certificates. The allowance of probate to any will that may after- 
wards turn up is a matter that is left discretionary with the Judge of 
Probate. It is not to be supposed that the Probate Court grants papers 
on a second will, except where the situation that might result from 
such a reopening would be unembarrassing ; for the neglect to present 
the right — the last — will at proper time and place should embarrass and 
entail loss upon the party guilty of neglect, and not upon the innocent. 

It may be safely stated that a bank is justified in making transfers 
under probate papers that are of due form, though it may transpire, as 
in the case I have named, that the papers may be annulled and new 
ones issued. 

There is, of course, no recourse under such circumstances to the 
Probate Court. It cannot be sued for damages — or rather, if sued, 
nothing can be recovered from it. 

That Probate Courts may make errors is proved by other cases as 
interesting as the one I have just described. Letters of administration 
were in one case that has come under my observation granted upon the 
estate of a person supposed to be dead. Under these letters a deposit 
in a savings bank was drawn out and paid to heirs. The party thus 
administered upon afterwards " turned up " and demanded his money 
from the Court. A suit was the result. Final verdict against the bank. 
It had to pay the deposit to the living owner, having recourse only to the 
original recipients of the property, who happened to be irresponsible. 

ESTATES OF NON-RESIDENTS. 

I have found that many corporations seem to be entirely unaware 
of the existence of any legal objections to the making of transfers upon 
foreign probate certificates, and have never hesitated at all over 
transfers of this character. Others who are aware of the legal objec- 
tions consider the usual risks of such transfers so slight that they are 
willing to overlook them — to take the responsibility of waiving the 
irregularity. 

In some of the New England States, where the shares belong to the 
estates of deceased parties who have been residents of other States* 



188 PRACTICAL BANKING. 

transfers can be regularly made without taking out letters of adminis- 
tration in the State where the bank is located. 

There are two ways of procedure to safely go through transfers of 
this character. 

Thus, in Massachusetts, a Statute was passed on April 22, 1880, 
providing that any Probate Court in that State might license a foreign 
executor or administrator to transfer or sell any shares in any corpora- 
tion in the county where the said Court was located without taking out 
any regular probate papers in Massachusetts. This law provided that 
the license in question should be issued under certain restrictions. 
Among them were these: 

1. No person resident in Massachusetts, interested as Creditor or likewise, must 
object to the granting- of such license or appear to be prejudiced thereby. 

2. No license shall be granted to any foreign Executor or Administrator until 
after the expiration of six months from the death of his testator or intestate. 

3. It must also appear that there is no Executor, Administrator, Trustee or 
guardian appointed in Massachusetts, authorized to sell, transfer or convey or receive 
such shares. See Chapter 142, Section 3, Public Statutes of Massachusetts. 

In a conversation which I have had with a Massachusetts Judge of 
Probate, relative to this law, I have learned from him that some 
advertising is necessary, and that a few weeks' time is needed to carry 
out these probate advertising requirements, after which a license will 
l)e issued in the following form (see Form 47) : 

COMMONWEALTH OF MASSACHUSETTS^ 

County of Suffolk Probate Court, ss. : 

I, John Doe, Kegister of the Probate Court in and for said County of Suffolk, 
I hereby certify that, at a Probate Court holden at Boston in and for said County j 
i on the 27th day of May, in the year of our Lord one thousand eight hundred and 

ninety Arthur H. White appointed by the Probate Court for 

the County of Kennebec, in the State of Maine, Executor of the will of 

Margaret Oliver late of Waterville, m said state of Maine, 

deceased, and duly qualified and acting as such Executor, was licensed to sell, 
transfer and convey— or to receive or otherwise dispose of— thirty shares of capital 
stock of the First National Bank, personal property which he is entitled to as such 
executor. 

I also certify that it appears by the records and files of said Court that said 
license is now in full force. 

In witness whereof I have hereunto set my hand and the seal of said 

court this twenty-seventh clay of May . mthe 

year of our Lord one thousand eight hundred and ninety. 

JOHN DOE, Register. 



Form 47. 

The expenses of the process are small — the total cost being not over 
five or ten dollars. 

Even this slight expense, and short delay, might be viewed by some 
foreign administrators and executors as so objectionable as to lead 
them to choose the second way and furnish a bond of indemnity, 
securing the bank permitting the transfer from loss on account of the 
imf ormality permitted. Such a bond would be similar in form to that 



THE STOCK — ITS OWNERSHIP AND TRANSFER. 18& 

which I give in the ease of lost certificates except in its recital of the 
differing circumstances. 

A TREASURER'S TRANSFER. 

The Kingston Savings Bank held shares in the Eleventh National 
Bank, of New York, which it had sold and wished to transfer. Their 
broker in New York presented himself at the Eleventh National Bank 
with the certificates of the sold shares and a power of attorney signed 
by the Treasurer of the Savings bank, and duly witnessed. Accom- 
panying the power and the certificate was a copy of a vote stating that 
at a meeting of the Board of Investment of the Savings bank the 
Treasurer was authorized to sell and transfer the shares in question. 
All these papers presented calling for a transfer were in the Treasurer's 
handwriting, entirely unsupported by any other names, seals or anything 
else of a substantiative character. The Eleventh National Bank rightly 
declined to make the transfer under these circumstances, saying the 
whole thing savored too much of the one-man power of doing business. 

The things needed in such cases are a duly sealed and witnessed 
copy of a vote of the Board of Directors or Investment Committee of the 
bank, showing the Treasurer has full authority to make the transfer. 

When the delegation of the power has been made by an Investment 
Committee the signatures of a majority of the committee should be 
affixed to their vote of authorization. 

Some bankers take the ground that a copy of Directors' votes or 
by-laws, showing the power of the Investment Committee, should also 
be furnished the transferring bank. But it is more generally held 
that the power of sale and transfer inheres in the Investment Com- 
mittees of Boards of Direction. 

Where the authorization to sell and transfer emanates directly 
from the Board of Directors, a copy of the special or general vote of 
this authorization, signed by the clerk, sealed and witnessed, and 
accompanied by an approval of the President of the Board, is the most 
desirable form of paper that can be presented to a transferring bank. 
UNSETTLED ESTATES AS HOLDERS OF BANK SHARES. 

There are some States where executors, administrators, guardians 
and trustees under a will are required, by statute, to state and settle 
accounts within a limited time — say one or two years. But this sort 
of statute limitation of the time of closing up the administration of 
an estate is in this country the exception rather than the rule. As a 
general thing the matter in question is left in about this way : As long 
as the debts are paid, and all the legatees choose to keep the property 
of the estate undivided, it is held that there is no legal, moral, or 
what may be termed business, obligation to close up the affairs of the 
estate of a deceased person. 

Hence, on the share lists of many banks may be found the names 
of parties now dead who have been shareholders. Their property 



190 PRACTICAL BANKING. 

has passed into the hands of executors and administrators, but these 
representatives of the dead stockholders have not transferred the 
stock to the heirs and assigns. There seemed to be no particular 
necessity for doing this as long as they could collect dividends and 
pass them over to the proper parties and the bank or the successors to 
the shares did not press them to make the transfers. 

There are various reasons why it is not well to move along in this 
careless and indefinite way ; and if transfers of the character named are 
delayed embarrassing circumstances are apt to arise. Many such cases 
have occurred. The parties whose duty it is to administer may them- 
selves pass away, and then the situation becomes complicated. The 
continuance year after year of collecting dividends under admin- 
istrators' and executors' orders on the shares of parties deceased is 
an irregular practice, and one that banks should not permit. This habit 
of delaying the work of making the proper transfers causes difficulty 
when the bank wishes to reach its individual shareholders for the 
purpose of reorganizing, liquidating, etc. 

It may be set down as common law that an administrator cannot be 
compelled to distribute the estate left in his hands until at least a year 
has elapsed since he assumed his duties. 

Yet, as the law providing for the settlement of estates of deceased 
persons expects and demands that such settlements shall be attended 
to within a reasonable time, it follows that after a reasonable time for 
settlement has passed, without bringing along any signs of such a 
culmination, legatees may force the administrators to hurry up matters 
by appeals to courts and judges. 

Jurisdiction of administration is vested in courts of both general 
and limited jurisdiction. 

The practical result of all this, as far as the transfer and division of 
bank shares belonging to estates is concerned is, in a great majority of 
cases, as follows : Executors, Administrators, etc. , who are prompt in 
their business habits, and who have a fondness for closing up trust 
matters just as soon as they can with justice to all concerned, transfer 
and distribute the bank shares belonging to the estate they have in 
hand just as soon as they can judiciously do so. Others, who are slow 
movers, and who have to do with legatees who are in no hurry — who 
have no wish for a division of the estate — will let bank shares hang 
along year after year in the names of the parties deceased. I have 
known instances where shares thus situated have remained untrans- 
ferred by administrators for thirty and forty years. But banks should 
not knowingly permit such a way of management ; and Cashiers are 
recommended to keep a close watch of their share lists, with a view of 
pressing upon slow executors the necessity of making the changes in 
the holding names of shares belonging to estates which they have been 
deputed to settle. This watchfulness can be exercised and made 
effective at the time of collection of dividends. A few enquiries and 



THE STOCK — ITS OWNERSHIP AND TRANSFER. 191 

suggestions then made will often serve as effectual reminders and lead 
to an immediate attention to the matter. 

TRANSFERRING SHARES TO DEAD MEN. 

If the cases with which the preceeding section has dealt may be 
termed objectionable what shall be said of this title ; and yet parties 
who are executors or administrators of deceased shareholders often 
present themselves at banks with share and probate certificates asking 
for transfers of the following character: They have perhaps made 
a sale or in some other way prepared themselves for a transfer of a 
portion of the stock upon which they are administering, but wish a 
new certificate for the balance in the name of the deceased holder, 
generally for the purpose of holding this balance, say, until they can 
sell the shares or make some other legitimate transfer of them. 
Although the issue of this new certificate for the balance is not in 
spirit a new issue of stock, it has, nevertheless, on its face this appear- 
ance ; and to make such an issue in the name of a dead person is a 
course that cannot be recommended. The only proper way in such a 
case is for the representatives of the estate — the executors or adminis- 
trators — to make a direct transfer of all the stock, transferring the 
sold shares to their purchasers and the remaining shares to themselves 
as executors. 

Regarding this last class of transfers it should be remembered that 
it is always better to transfer to and issue certificates in the name of 

the executors or administrators than to transfer to the estate of , 

not naming the representatives of the estate. It is often questioned 
whether a bank has a right to demand that executors and adminis- 
trators shall go through the form of making a transfer when they 
surrender old certificates of a deceased shareholder and take out new 
ones in their own names as representatives of the estate, because it is 
claimed that all that is necessary in such cases is that the old certificates 
shall be surrendered and a demand for new ones made by the adminis- 
trators on the simple exhibition of probate proof that they are the legal 
representatives of the deceased shareholder. But it seems clear that a 
bank should not cancel old certificates and issue fresh ones in a new 
form without having behind such a retirement and reissue the most 
direct evidence and record that the action has been duly authorized 
and demanded. And what better form of proof of and support for 
such action can be furnished than that supplied by a formal act of 
transfer upon the books of the bank ? 

EXTEMPORIZED TRUSTS. 

Many parties are in the habit of making deposits in banks and 
trust companies and taking out certificates of share-holdings in their 
own names as trustees where no actual trusteeship has any legal exis- 
tence. Investments so placed rest easy enough as long as the parties 
who locate them in this manner survive, are able to take care of them 



192 PRACTICAL BANKING. 

themselves, and do not wish to move them. I have already briefly- 
referred to the difficulties which may result. Let me illustrate more 
fully : Mr. Amos Smith buys a hundred shares in the Rhodes National 
Bank with his own money and for himself. But he takes the whim 
that he will have the bank transfer it to himself as trustee — trustee 
without any affix, or trustee for some name which he presents, the 
said trustee-form being an innocent fiction concocted to suit his con- 
venience. In the course of time Mr. Smith passes away, leaving in the 
hands of his heirs the certificate in question. How shall the bank of 
its issue proceed in case of a request for its transfer? Obliged by 
decisions of law to require a sight of the powers resting in any trustee- 
ship before it can act in these trustee transfers, it asks for a satisfactory 
proof that the trustee in question had a right to transfer and sell — in 
fact, demands to know what his precise powers were under his trustee- 
ship. This enquiry is met by the response that no trusteeship actually 
existed — that it was a purely extemporized affair. The bank in such a 
case as this will refuse to transfer unless under an indemnity bond 
covering all the risks of the irregularity of the demanded transfer. 

LOST CERTIFICATES. 

Still another lady figures in a lost stock story. She owned twenty 
shares of stock in the bank, for which she held the usual certificate 
made out in her own name. She wished to transfer a portion of this 
stock for the purpose of selling it, but, on looking for the certificate, 
preparatory to visiting the bank to make the desired transfer, it could 
not be found, though a long and weary search was made for it. She 
was confident that she had long ago placed it, as was her custom, in 
what she thought was the safest place in the house, but what that safe 
place was she could not recall. She finally came to the bank, bringing 
along her husband, and both united in a request that a new certificate 
be issued in place of the lost one. Banks are always reluctant to give 
out these duplicates unless all hope of finding the originals has disap- 
peared; besides, as explained elsewhere, there are in such issues 
formalities to be gone through with in the preparation of bonds which 
are very troublesome both to the applicant and the bank. While I 
was hesitating over the matter, I suggested that further time be taken 
to make a more vigorous search for the lost voucher, because I had 
experience with many cases where such a search had been successful 
under similar circumstances. The lady and her husband went away 
sorrowful; but they promised to hunt further. Not long after they 
returned bearing the long-lost certificate, which the lady said had been 
found in a favorite safe deposit place of her own invention — in the 
bottom of a family trunk under a false bottom made by a newspaper. 
She had looked in the trunk several times, but had not before looked 
under the open newspaper at the bottom. 

The instances where' parties owning shares lose or mislay their 
certificates are not very infrequent; and, as I have indicated, when 



THE STOCK— ITS OWNERSHIP AND TRANSFER. 19& 

such unfortunates present themselves to a bank asking for an issue of 
a new certificate to themselves or for a transfer of the stock to others', 
to whom they may have sold it, they are told that if it is absolutely- 
impossible for them to produce the old certificate a transfer will be; 
granted them or an issue of a new certificate to themselves- will be- 
allowed if they will furnish the bank with a satisfactory bond guaran- 
teeing the bank from any loss which may come from the presentation 
of the original certificate. 

Here is a concise form (see Form 48), for a bond of this character,, 
being an exact copy of one that has done actual service in a bank in 
a case where a certificate had been lost by fire : 



Know all men by these Presents: 

That we, 6r. Alfred Holmes, of South Dedham, 

.in the County of Norfolk, and State of Massachusetts, as principal, and 

.........P. 6r. HCLVriSOn, of said Norfolk County, and State as aforesaid, 

are holden, and stand firmly bound and obliged, unto the First National Bank 
of Worcester, a corporation organized under the laws of the United States of 
America, in the full and just sum of One Thousand Dollars, to be paid unto the 
said First National Bank, its successors or assigns, to which payment well and truly 
to be made we bind ourselves, our Heirs, Executors, and Administrators firmly 
by these presents. 

Sealed with our Seals. 

The condition of this obligation is such, That, Whereas on the 

fOUrth day Of March, A. D., 1890 y . said bank issued to said 

Gr. Alfred HolmeS a certificate of five -shares, being 

certificate numbered 2007, which said certificate has been stolen, lost, 

or destroyed ; and, whereas the said bank has agreed to issue a new certificate,, or 

certificates, of said five shares, to such persons as the said Gr. Alfred/ 

HolmeS - shall direct in place of that stolen, lost, or destroyed. 

Now, therefore, if the said certificate, number 2007 , shall be found, 

and in consequence thereof, or from any cause therewith connected, the said bank- 
shall suffer loss resulting from the issuing of said certificates, then the above 
bounden parties of the first part will indemnify and save harmless the said bank 
from all loss and injury so suffered and sustained. 

Commonwealth of Massachusetts, Norfolk, ss., April 18. 1890. 

There personally appeared the above named Gr. Alfred HolmeS 

and. P. Gr. Harrison, and acknowledged the foregoing 

instrument to be their- free act, before me. 



Form 48. 

SHAREHOLDERS WHO CHANGE THEIR NAMES. 

Shareholders should notify the bank in which they are owners of 

the change which has taken place. They should also go to the bank 

in person, or by attorney, with their certificates in hand, and make a 

transfer of their stock to the new name they have adopted. 

Such cases are not so unusual as might be supposed, for changes 
in name to which I am referring are those which take place when a. 



194 PRACTICAL BANKING. 

lady holding shares in her own name and right takes a new name by 
marriage. Banks do not always promptly detect these changes in 
name, though they might generally do so if they watched carefully the 
signatures to their dividend book and the dividend orders. When they 
do observe these changes they ought to ask the parties changed to 
"bring in their old certificates, make a transfer, and take out a new 
certificate in the new name. Transfers of this sort are made in this 
way : Mary White that was — the Mary White in the old certificate — 
should sign and transfer thus, "Mary White Jones, formerly Mary 
White," and she should make the transfer to her present self, Mary 
White Jones, the bank, as it makes the move, assuring itself, of course, 
that the two names are of one and the same person. 

I have right in mind a recent case which is of interest and clearly 
exhibits the proper steps to be taken. 

Miss Delia Morse held ten shares of bank stock in her maiden name, 
and held in her own hands the certificate of the same. A gentleman 
came to the bank with this certificate, holding also a power of attorney 
for the transfer of the certificate, signed Delia Morse. The power was 
nlled with an authorization to transfer these ten shares to Mrs. Delia 
M. Brown. Miss Delia Morse had by marriage become Mrs. Delia 
Horse Brown, and so she wished to have the stock placed in her new 
name. The question was at once raised by the Transfer Clerk of the 
b>ank as to whether or not the power of attorney was properly signed. 
This question took an unusual aspect from the curious fact that Mrs. 
Delia Morse Brown, who appeared upon the power of attorney in her 
maiden name, had been married but a few days, and had signed the 
power the day before her marriage. The bank decided, and correctly, 
that the power could not be received by them in that shape, and that 
it must be signed "Mrs. Delia Morse Brown, formerly Miss Delia 
Morse." The delay of the party holding the power to use it until the 
lady had changed her name rendered it imperatively necessary that 
this unused power should also have its signature changed. When it 
i^as presented there was no longer in existence any such name as the 
Miss Delia Morse of the certificate, and the obsolete name could not be 
recognized by the bank as the proper signature of the present living 
owner of the stock. 

It is so clearly established that a married lady making a transfer of 
stock standing in her maiden name must sign her married name, add- 
ing the statement, "formerly Miss ," that no intelligent bankers 

hesitate over the point. In the case just quoted, the peculiar fact, that 
the lady who was transferring to herself had signed the power of 
attorney before she had changed her name, made the situation novel 
and somewhat complicated. 

While I am talking of lady shareholders, I may say that until a 
comparatively recent date many of the laws of this country relative to 
the rights and duties of women in matters of banking have been very 



THE STOCK — ITS OWNERSHIP AND TRANSFER. 195 

burdensome to them. Here is a single illustration of this point, drawn 
from Massachusetts banking experience, in the days when a married 
woman holding bank shares in her own right and name could not 
transfer them until she had first obtained the approval of her husband. 
She came to the transfer desk of the bank with her share certificate 
— a certificate of twenty shares standing in her own name, which 
was stock that had been a maiden inheritance. She was a highly 
intelligent woman, of the first respectability, and known at the bank. 
She asked that she might be allowed to make a transfer of the shares, 
as she wished to turn them into money. The Transfer Clerk was 
obliged to ask her if she had a husband — a question which seemed an 
unwelcome surprise to her. After politely enquiring why she was thus 
interrogated, and receiving a full explanation of the situation, which 
amounted to a flat reflusal to make the transfer unless the approval of 
the husband was obtained, the lady went away sorrowfully, and in time 
returned with a husband whose appearance and habits were such as 
rendered him remarkably unpresentable. He was an intemperate, low, 
stupid man, and a burden to his family, yet the law demanded that he 
should be brought to the bank and give his approving signature to the 
transfer, though he and his signature were of little account elsewhere. 



196 PRACTICAL BANKING-. 



CHAPTER XII. 

THE BANK'S CIRCULATION. 

Every National bank ought to keep an accurate and detailed record 
of all the new circulating notes it receives from the Comptroller of the 
Currency — all that are retired at Washington as unfit for circulation, 
and all that have been redeemed by the department and returned to 
the bank as fit for re-issue. And this circulation record should not 
only be kept so as to show the separate and aggregate circulation 
transactions which I have just mentioned, but it should also show at a 
glance the amount of each transaction in each denomination of bills 
the bank has had outstanding, as well as those on hand in the printing 
department at Washington. 

On page 197 is a model of a Circulation Book (see Form 49) the 
original of which is in use in a large bank, and the page of circulation 
transactions here shown records actual movements. This form will 
need a little study ; but, when examined by any bank clerk, it will, I 
think, prove itself to be useful and concise. 

A current careful study of the tables of issues and retirements of 
bills of the various sizes which can be made in this book will show 
readily what bills circulate the best — are kept out the longest. The 
manager who has facts of this character well in hand is by them guided 
to a conclusion as to what proportion of the different denominations 
of bills at his command shall be ordered from the printer and scattered 
as circulation. Many of our best bank managers understand the value 
of the studies we have described, and profit by them accordingly. 

The mention of this matter of keeping out circulation must remind 
many a banker of curious reminiscences relative to the circulating 
business under the old-time State system of banking. In those State- 
bank days the most spasmodic and often costly endeavors were made 
to scatter the small bank notes far and wide. Many of our active 
business men will well remember the great reputation the banks of 
Hartford had for vigor and skill in keeping out and widely scattering 
the enormous circulation they were carrying in the days of the glory 
and strength of the Suffolk Bank system. At that time, bills came 
quickly home by the way of the great New England central redemp- 
tion agent in State street, if extraordinary shrewdness was not shown 
in scattering them where they would do the issuing bank the most 
good by keeping out of the clutches of the old Suffolk. 

Manufacturers, hotel-keepers, and all sorts of consumers of small 



THE BANK'S CIRCULATION. 



197 




Form 49. 



198 PRACTICAL BANKING. 

notes, were then given quite long loans, without interest, upon the 
simple condition that they should take pay in the small notes, and 
agree to pay them out only in small lots to persons who would scatter 
them widely. 

Banks discounting under such bargains as these would often place 
an ear mark on the bills — a date and initial, for instance — which should 
serve as a detective in the work of watching to see whether or not the 
borrower lived up to his contract in the matter of giving the bills a 
good send-off and a long life. I remember well that it was not 
infrequently the case that these agreements would be conveniently 
forgotten, and into the Suffolk, in a huge, uncut package, would come 
five or ten thousand small notes, all of some one bank, and which had 
been loaned upon the circulation conditions we have described, only 
to come home when the ink was scarcely dry upon the note which had 
been given for them. 

Borrowers who were detected by the ear marks we have named in 
these failures to carry out their contracts were seldom given an oppor- 
tunity to renew them. 

I remember one curious incident connected with this business of 
forcing a circulation which happened daring the year the war of the 
rebellion broke out. The now defunct White Mountain Bank of 
Lancaster, N. H., loaned a cotton buyer several thousand dollars, 
with the understanding that he should take the small notes of the 
bank to the far South and scatter them in purchases of cotton. In 
accordance with this agreement the borrower took himself and his 
White Mountain bills to the southern part of Texas, where both had 
the ill-luck to be captured by the rebels, who threw the speculator into 
prison, and, disgusted because the bills were State bills and not the 
ever-welcome Greenbacks, angrily destroyed upon the spot the whole 

lot of money. 

STOLEN NOTES. 

Too great care can not be taken by bankers in the handling of the 
sheets of their incomplete circulation. When they are duly signed, 
cut and turned into the Paying-Teller's cash, they will, in one sense of 
the phrase, take care of themselves. But while they are in the pro- 
cess of being turned from printed sheets into paper money they need 
very careful watching. The Cashier, in receiving them from Wash- 
ington, should promptly see that the sheets are counted, should imme- 
diately send back his receipt for them, keep them carefully in charge 
till signed, and, when signed, at once cover them into the Teller's 
cash. If they are sent out of the bank to be completed with printed 
signatures, and cut and trimmed, an officer of the bank should go 
with them and superintend their completion and return to the bank. 

Many unsigned bills have, first and last, been lost, stolen, or other- 
wise mysteriously disappeared at some stage between their issue by the 
department at Washington and time of their proposed issue at the banks. 



THE BANK'S CIRCULATION. 199 

Presidents and Cashiers have had these incomplete bills snatched 
from their desks by thieves, and they have, somehow, been spirited 
out of the hands of common carriers. Being bright and genuine in 
face and feature, rogues have "completed" them by affixing good- 
looking signatures, and set them afloat at the expense of honest circu- 
lators of paper money ; for these lame bills travel just as well as the 
most sound ones. 

REDEMPTION OP MUTILATED NATIONAL BANK BILLS. 

The Treasury Department has established rules for the redemption 
of mutilated National bank-notes, and these rules have from time to 
time been changed in many points. They are sent in circular form to 
all the National banks, and in this way have been constantly kept- 
before them, since the establishment of the National banking system. 
It cannot be positively asserted that these Treasury redemption rules 
are binding on the banks, but as a general thing the banks have 
accepted them as their guide, and the bill-holding public have the 
power to keep the banks up to these rules, since, in case of their 
refusal to do as well by them in redeeming mutilated notes, they can 
appeal to the Treasury Redemption Bureau by sending them to Wash- 
ngton for redemption. 

Many banks move along without any particular regard to Treasury 
redemption rules. But, as long as these rules are the only ones they 
are supposed to be amenable to in this matter, they should be uniformly- 
accepted and acted upon. 

Carelessness on the part of the banks in this regard grows out of 
the fact that they reason that, as the Government is to get all the 
profits from the lost and worn out circulation, they need take little 
interest in the treatment of their worn and mutilated notes. 

REDEEMING FRAGMENTS OP BILLS. 
The custom of the National banks, which they have looked upon as 
one fully authorized by the Banking Department at Washington, is to 
redeem at full-face value all fragments of their notes which are 
accompanied by a sworn affidavit, attested by the Justice of the Peace r 
that the missing portions are destroyed. From the fact that the 
Government will allow full value where the bank has, in cases of 
mutilations and partial destruction, redeemed at full value, and. 
that the National banks make nothing out of the lost bill item, the 
banks are not inclined to be very cautious in this matter of redeeming 
the class of notes referred to. Their carelessness should not be 
encouraged or approved. The affidavits in question should be carefully- 
scrutinized. It is easy enough for rogues to manufacture them for 
fraudulent purposes and to get up fictitious ones, the fictitious notarial 
attestations and seals having every appearance of the genuine article. 
Before a bank redeems a fragment of one of its issue which is presented! 
accompanied by an affidavit, it should endeavor to thoroughly satisfy 



'200 PRACTICAL BANKING. 

itself that the affidavit is genuine and that the party making the same 
is reliable. 

Since fragments of bank notes will, under some circumstances, be 
redeemed, it follows that any portion of a bill may seem, in the eyes of 
some people, to be quite like money and of real cash value. I remem- 
ber an amusing illustration of this point : Our bank had to cancel, at 
one time, a large amount of bills that were unfit for circulation. This 
was before the establishment of the present method of "Washington 
central redemption and destruction. Our practice then was to cut 
out the signatures of the bills. These we threw into the waste-paper 
baskets by the quart. Sometime after a large cutting of the character 
described, the police of a neighboring town came upon a great quantity 
of the cut-off-signatures carefully stacked away among the rafters of a 
;stable, where they had evidently been placed for safe hiding by some 
TOgue who had abstracted them from the bank waste-paper, thinking 
them of some money value. The purloiners of these scraps were never 
discovered — were, in fact, never hunted for — for the stuff lugged off 
was, of course, of no value. Yet there was something so unsatisfactory 
in this idea that valuable signatures — valuable in their proper places — 
were, if not burned when cut off, liable to be stolen and preserved in 
the way we have described, that this astonished bank afterwards did 
what all banks should do under such circumstances — burned all the 
signatures it detached from its bank notes. 

LOST BANK NOTES. 

Whenever a National bank closes up business it pays into the 
Treasury of the United States, in legal-tenders, the full amount of 
money the United States has advanced upon the Government bonds 
— advanced in the shape of National bank unsigned notes — and the 
Treasury then surrenders to the bank the United States bonds deposited 
as security for circulation and fully assumes all the responsibility for 
the redemption of the bank's entire outstanding circulation. 

In the end the Treasury pockets all the money not called for — no 
insignificant sum — since the experience of the past shows that, with 
hanks of long standing, a great many bills fail to return to their parents. 
Under the old State system of banking this item of profits all went 
into the pockets of the liquidating institution. 

But, under the State banking system, the banks had to pay for the 
manufacture of their circulating notes — the paper, the engraving and 
printing. All this expense is now assumed by the United States. 

The banks pay the cost of running the Redemption Bureau, but 
they pay nothing for the incomplete currency — the unsigned notes 
which were furnished them to do business with at the start. 

OVER-ISSUES OF NATIONAL BANK NOTES. 
There has been made public within the last ten years at least one 
instance where National bills printed from genuine plates have in 



THE BACK'S CIRCULATION. 201 

some mysterious way been surreptitiously and fraudulently issued 
from the banking department of the United States Treasury — issued, 
of course, with signatures manufactured to order, and either imita- 
tions of the autographs which should have been attached or hap- 
hazard names put on at random in the places where the genuine 
signature should have been affixed. 

In the tremendous volume of business in circulating money which 
has been transacted under the National banking system between the 
Treasury Department and banks since the National bank circulation 
commenced, footing up many hundred million dollars, there may have 
been over-issues from genuine plates that were not discovered. 

There is another phase regarding National bank circulation which 
takes on an aspect of an interesting and curious character when care- 
fully considered. 

The point I have in my recollection may be easily illustrated by an 
imaginary case. 

Suppose, for instance, that a bank has outstanding a regularly 
authorized and duly recorded circulation of $500,000. It gives up this 
circulation by withdrawing its bonds and depositing in their place with 
the United States Treasurer $500, 000 in lawful money, which relieves 
the bank from all further responsibility to redeem the notes, and places 
it upon the United States Treasury Department. In time the entire 
$500, 000 deposit is entirely absorbed in redeeming the notes, and still 
more bills of the same issue come in for redemption. Such a develop- 
ment would prove one of two things. Either fraudulently-issued bills 
of that bank have been redeemed and destroyed or the notes in excess 
of its legitimate issue which are now being presented are the counterfeits 
of bills issued from genuine plates and completed with forged signatures. 
If the bills are of the last-named character, and can clearly be proved 
to be so, the way out of the dilemma is short and easy — the bills will 
be condemned and thrown back upon their unfortunate owners. But, 
if they are genuine bills, what shall be done with them? That is the 
question. Their presentation after the redemption fund of this bank 
is exhausted shows conclusively that fraudulent bills purporting to be 
of that bank have been redeemed and destroyed. This destruction has 
complicated the situation. Of the $500, 000 that have been redeemed 
and destroyed some have been good and some bad. But no traces of 
their existence and character remain. The good and bad have all been 
paid for, and no recourse can be had to anybody. 

The question now arises, how are the genuine bills which remain 
outstanding to be paid for ? They are in honest hands and are good 
notes. 

Who is to pay for them ? 

In the grand circulation-settling day that is to come some time or 
another it is to be trusted that the Government will have to the credit 
of profit and loss a fund — the outcome of profit on outstanding bank 



202 PRACTICAL BANKING. 

notes lost and destroyed — which shall be large enough to meet any 
such contingencies as the one imagined. 

THE REDEMPTION BUREAU. 

This is a department of the United States Treasury devoted to the 
work of redeeming, in lawful money, the notes of the National banks. 
Every National bank is required to keep with the United States 
Treasury at all times a redemption fund equal to 5 per cent, of its 
circulation. As the inflowing redemption-seeking notes of a National 
bank trench upon this 5 per cent, fund the bank is notified of the 
deficit and must make it up at once. Any individual or bank can 
obtain lawful money on demand at this Redemption Bureau in exchange 
for National notes if they present them in sums of one thousand dollars 
or any multiple of that sum. 

When National banks send to the Redemption Bureau National 
bank bills for redemption in lawful money they do not pay expressage 
on the National bank bills, but they do pay for the transportation of 
the lawful money sent back when returns of this character are ordered. 
They order returns in lawful money when they are in need of small, 
new Treasury notes. When not in need of these they ask the United 
States Treasurer to send in payment for the redemptions drafts on the 
nearest Sub-Treasurer, and in collecting such drafts are obliged to take 
such denominations of legal-tenders as the Sub-Treasurers see fit to 
give them— or even to accept silver if the Sub-Treasurers choose to 
pay in standard silver dollars. 

The Redemption Bureau at Washington is the old Suffolk Bank 
system revised and improved. (See David R. Whitney's excellent 
history of the Suffolk Bank). 

The expenses of this National bureau are assessed upon the National 
banks, bearing upon each in direct proportion to the amount of its 
circulation redeemed. Bills for the same are sent to the banks once a 
year. Items of this bill are charges for transportation, cost of assorting, 
salaries, printing and binding, stationery and contingent expenses. 

The redemption story of a National bank-note, after it reaches the 
Redemption Bureau at Washington, can be quickly told. When 
received they are at once assorted by the names of the issuing banks 
— mainly by women — and this work is greatly facilitated by the fact 
that in addition to the name the distinctive number of each bank is 
shown upon the face of its notes. After this assorting the worn 
and mutilated bills which have become through hard service unfit for 
circulation are destroyed, and bills capable of further circulating service 
are forwarded by express to the banks whose name they bear. 

New currency in sheets is at once forwarded to banks to take the 
place of worn out notes which have been redeemed and destroyed. 

DESTRUCTION GF NOTES. 

The Redemption Bureau now boils the bank-notes whose usefulness 
is at an end into pulp by the use of steam and huge cylinders. It 



THE BANK'S CIRCULATION. 203 

formerly burned them. The pulp result is used to make a brown paper 
which passes into packing use in grocers' stores. In a visit to the 
Redemption Bureau I was handed a brick made from the bank bill 
pulp of the department — a solid, shapely brick of a gray hue containing 
the substance of I know not how many hundreds of thousands of paper 
dollars. The brick now rests in the museum of the Young Mens' 
Christian Union, of Boston. 

This description of the modern way of destroying unfit-f or-circulation 
bank-notes reminds us of some old-time experiences with bank bill 
destruction when fire was used to end their career. In those old days, 
under a State system of banking, it was the habit of our banks to burn 
in the open grates of their Directors' rooms their returned worn and 
mutilated bills. These bills were allowed to accumulate in the cash of 
the Paying-Teller until he had on his hands enough of them to make it 
an object to summon a committee of the Board of Directors to make a 
business of burning them. At such burnings a brisk coal fire was 
made in the grate named, and the bills, having previously been 
recorded by their numbers, marks and amounts in the books of the 
bank, were thrown into the fire and consumed in the presence of this 
burning committee. Persons who have not had experience in this sort 
of business have little idea of how difficult and tedious a thing it is to 
burn up entirely a bundle of soiled old bank-notes. On the occasions 
we are describing a deal of stirring of the fire and the bills was 
necessary, and considerable time was required to complete the destruc- 
tion. In at least one instance bank bills, whole and partially consumed, 
were carried by a strong chimney draft out to the street where they 
were picked up by the astonished news boys and other fortunate finders 
of the waifs. This remarkable method of issuing circulation was after- 
wards checked by covering the throats of the chimneys with a wire 
netting when bills were to be burned in open fires. I remember an 
instance where a New England bank was in the habit of having its 
old bills burned in the forge of a blacksmith's shop. This worked well 
enough until it was discovered that quantities of notes, supposed to 
have been consumed in that shop, appeared again in circulation, 
showing that the blacksmiths who had assisted in the work had by 
sleight-of-hand abstracted the condemned notes while burning them. 



204 PRACTICAL BACKING. 



CHAPTER XIII. 

THE MAIL AND THE TELEGRAPH. 

In bank Book-keeping, and in the general inside clerical and 
recording work of a bank, while a legible, fair handwriting seems abso- 
lutely indispensable, there is little call for the exercise of the art of 
English composition — little demand for a talent for the construction of 
sentences or the art of expression. In fact, constant employment in 
the narrow, routine work in question tends rather to the contraction 
than to the growth and expansion of those faculties which are called 
into use in rhetorical composition. 

Day after day, and year after year, ordinary banking-clerk work is 
but the task of writing, over and over again, a very limited vocabulary 
of words and phrases. As an inevitable effect, if such a result is not 
carefully hedged against by resolute study outside the bank, the bank 
clerk is apt to lose the power to express himself in an elegant, clear and 
concise manner when general subjects outside of the rut in which he 
has so long been moving demand his attention. This defect in his 
education and mental discipline is apt to be made clearly evident when 
he is called upon to give attention to the general correspondence of a 
bank. 

And in this sort of work there are requisites even more import- 
ant than the ability to write an elegant hand. A lack of directness and 
conciseness, general clumsiness of expression, and, worse than all, bad 
grammar and bad spelling, have been known to characterize the letters 
of bank officers of good general intelligence who have done for years 
neat and faithful clerical work in various departments of their bank. 

Young men often leave high schools of the period, from which 
they have graduated with honor, without a decent education in the 
matter of such a staple accomplishment as letter-writing. And these 
young men may for years discharge passably well the duties belonging 
to most departments of bank work without being called upon to show 
their ignorance by doing anything in the way of business and general 
correspondence. 

One of the standard rules in a properly managed bank is to answer 
just as promptly as practicable — on the day of receipt, if possible — all 
letters that demand a reply. When these replies are more than a 
simple acknowledgment of a letter received, with enclosures as stated, 
that "more" should be in style concise, clear, very courteous under 
all circumstances, and, beyond all things, legible in date, body and 



THE MALL AND THE TELEGRAPH. 205 

signature, and in matter strictly and closely confined to the businesr in 
hand and demanding attention. 

In the class of letter- writing we have in view there should not be 
one word or figure more or less than is positively demanded for the 
clearest presentation of the matter in hand. 

It is sometimes the case that letters of this purely business character 
which I am describing are written in such a concise — such a short-hand 
and doubly compressed style — as to be open to the charge of being too 
compact, curt and laconic to answer the ends for which they were 
written. Brevity in business letters is very desirable ; but that brevity 
which sacrifices clearness and proper explicitness is as bad, or worse, 
than a leaning to diffuseness. 

Every business man has, at one time or another, been badgered by 
letters of the type I have just been describing. 

Let me introduce an actual letter I have received from a gentleman 
applying for a bank situation, which is a pointed illustration of the way 
business men often slip into the habit of putting things in business 
correspondence in an almost amusingly graphic and condensed style : 
Here is the genuine, live, original letter, proper names eliminated : 

THE BANK OF , ) 

The Cashr. Chicago, 24 July, I884. \ 

Natl Bank, 

Boston. 

Dear Sir : I am Teller in the , they have closed, want a position, 8 

yrs at cash, 28 yrs. old, married, very fast and correct, any room for me on your 
staff? Present salary in Chicago $1,000. Yours respectfully, 

JOHN JONES. 

In the matter of stationery used, and in all the printing and 
engraving brought into requisition in getting up books, letter-heads, 
checks, etc. , the banks have an opportunity for the exhibition of good 
taste and general neatness and propriety of styles, and they ought to 
improve it. 

In selecting paper for use in correspondence they should choose a 
good article ; and, where printed headings are called for, they should 
be well executed. It is poor economy for a bank to be careless and 
slovenly in this matter. And the same remarks apply to every class of 
stationery equipments called into service in a bank. Its checks and 
drafts should be of a neat and attractive type ; its notices, circulars, 
etc., in service in the collection and messengers' departments should 
be executed in good form, the most careful attention being paid in their 
preparation to the matter of their English, their punctuation, and the 
paper and printing called into request in their make-up. Banks are 
looked to as a sort of standard in these matters. General business 
men expect them to be very neat, correct and appropriate in these details. 

Few things are a more accurate test of the way the internal direction 
of the details of a bank are carried on than the exhibition it makes of 
itself to outsiders in the direction we have been describing. 

The use of postal cards in banking correspondence is quite general, 



206 PRACTICAL BANKING. 

yet there are banks as well as merchants who have never used them, 
and say they never will under any circumstances. The reduction of 
postage to two cents for a letter of ordinary size has strengthened these 
enemies of the postal card in their opposition to them. 

The particular objection to the use of these cards in banking corres- 
pondence is that it is extremely desirable in letter writing that no 
words, beyond a mere acknowledgment of letters received, shall be 
mailed from a bank without being put through the copy-press. In 
well-regulated banks the standing orders are to have everything copied. 
When postal cards are in regular use in a bank, writing of all sorts, 
and often words of no little importance, are apt to be hastily written 
on them and mailed without retention of any copy in the bank. 

While I am on this subject of stationery I may mention an envelope 
sent me for examination and which has come into quite general use. 

I can remember very well when the use of envelopes, particularly 
on important business letters, was highly deprecated by the best 
business men, and many such were very slow to adopt the innovation. 
They rightly valued very highly the preservation of the post-marks on 
every letter, for they had known of cases where their loss had caused 
a deal of difficulty, and where the post-marks on a letter would have 
settled very important points in the court room. 

It was often the habit of prudent bankers, etc., when the use of 
letter envelopes began to be general, to carefully remove and preserve 
all the envelopes of the business letters they received. Now such are 
invariably torn at once from the letters and flung into waste baskets. 

The point of the invention on this envelope of which I speak lies in 
the fact that it secures the final preservation of the envelope by making 
it a part (a fixed attachment) of the letter itself. 

The rapid increase in the use of the common envelope which has 
sprung up within the time of many a banker who reads this volume is of 
curious interest. They originally came from Paris. In Europe at one 
time they were only used as an outer covering for regularly folded and 
sealed letters to preserve the latter when they were sent out by the 
hands of private messengers and servants. About fifty years ago the 
first envelopes used in Boston were made for Mr. Allyne Otis by Mr. 
N. D. Cotton, a venerable stationer still living, on patterns brought 
from Paris. Mr. Cotton got them up by hand and Mr. Otis and his 
friends used them after the Paris fashion. From this small beginning 
the envelope has spread to its present enormous use in the United States. 

It is possible that the serious objections to the present common 
envelope may in time lead to its being thrown aside for a substitute 
that will not be open to objection, or the envelope system may go 
entirely out of fashion and folded and sealed letters in some improved 
form come into general use. 

The letter-copying machine should be in constant use in every 
active bank. Every letter sent out that contains anything beyond a 



THE MAIL AND THE TELEGRAPH. 207 

simple acknowledgment should be copied. It is difficult to overesti- 
mate the value of having such a complete fac simile record of what 
has been sent out of the bank. 

If one would understand something of the worth of this copying 
system, let him try to imagine himself running a large bank without 
its aid, calling to his mind the anxieties and troubles, losses and com- 
plications which would be sure to arise where there was not ever 
present an opportunity to turn to a well kept letter-book for a complete 
and perfect record of all that had been written in the bank and sent 
away, never again to be seen by the writer. 

Banks should supply themselves with the latest and best copying- 
presses, and adopt the last improvements in the way of applications 
to be used in running one of these presses. I have not the space nor 
the wish to describe what is the best kind of press, or the best way of 
using it, since any good stationer will show the reader at once the 
latest improvements that have been made in copying supplies, and 
also, if need be, show him how to use them. 

Having then the right tools, the copy-book should be rightly kept. 

Every letter should be carefully, legibly and neatly copied. Tissue 
paper is not very costly. Every separate letter should be given plenty 
of space. There should be no crowding or clipping of signatures or 
dates, but each letter should stand out strong and clear ; every feature 
of it, from date to signature, conspicuous. Letter-books can be kept 
in this way, for I have seen many such. 

It is an excellent plan to use, for the printed portions of letters, a 
copying ink; and there is no difficulty in securing letter blanks so 
printed that every word of them can be clearly transferred into the 
machine copy-book. 

It is, of course, necessary, in order to keep a neat and useful letter- 
book, that the original letters should be written properly — as far as 
the mechanism of the business is concerned. And in this respect they 
will be more properly prepared if the writer always bears carefully in 
mind the fact that his letters are not only written to be read, but 
written for some under-clerk to copy. 

Letter-books should be built up on some plain and simple index 
form, since, without an index, they are robbed of much of their use- 
fulness and convenience. 

A RECORD AND ITS USE. 

After the copying comes the record, and on page 208 is a form (see 
Form 50) of a book which answers an excellent purpose as a register of 
letters sent, letters received, and the dates of their acknowledgements 
and issue. 

The form explains itself quite clearly; but perhaps a note or two 
regarding it may not be out of place. It will be seen that the entry of 
a letter received and answered can often be supplemented with the 
register of one sent, and requiring acknowledgment, without re-writing 



PRACTICAL BANKING, 



the name of the correspondent. This is shown by the first record on 
the form, where a letter is received from the Mercantile National Bank, 
and acknowledged, and one also sent to same bank, which must be 
acknowledged. 

The dashes in the place of figures, opposite the names and dates of 
letters received, indicate that these received letters needed no answer. 




Form 50. 

If a bank is to use any sort of a letter register, one more simple and 
desirable than this cannot easily be devised. It has many points of 
value. A glance at this record will show what letters demanding an 
acknowledgment have not been replied to. The Corresponding Clerk 
will keep a careful watch of it ; and, if delinquents appear upon it, he 
will look them up at once, for in banking correspondence it is impera- 
tively necessary that prompt answers to all letters of value sent out 
shall in all cases be forthcoming. If letters have been lost, or have in 
any way miscarried, it is highly important that an early knowledge of 
the fact should be in the hands of the bank, so that it may stop pay- 
ments, issue duplicates, or institute searches in that prompt manner 
which due diligence in the banking business demands. I believe in the 



THE MAIL AND THE TELEGRAPH. 20$ 

system of requiring acknowledgments for all letters containing remit- 
tances of checks, notes and drafts, as well as those containing more*, 
easily negotiable — convertible — contents, such as money, coupons, etc. 

There is a growing custom among banks of not demanding answers- 
to letters remitting endorsed checks and the like, but it is not a, 
custom to be commended; and in general terms I may safely say that 
it is the best plan in the administration of a bank to take as few things, 
for granted as one possibly can, and it is always advisable to receive 
from all connecting quarters square acknowledgments for all letters, 
sent as well as for all accounts rendered. Banks frequently head, 
their accounts current sent home to banks having open accounts with 
them with the phrase "if not acknowledged within (say 30 days) it. 
will be taken for granted that this account is correct." The use of: 
this disclaiming heading is well enough, for, in some contingencies, it; 
may be of service. But direct and positive acknowledgments of all- 
accounts rendered in this way should be insisted upon — should be 
drummed for if not duly returned. In this way lies safety. 

And so in the matter of letters with enclosures. Establish the rule 
of requiring acknowledgments. Do not rely upon the long-delayed, 
and indirect acknowledgment that comes by the way of endorsed, 
checks or is reached by a silence that is taken for a consent. The 
maintenance of a prompt system of acknowledgments gives an early 
notice of non-receipt of valuable letters, which information is often of 
great importance. 

We shall, of course, live up to our principles and give prompt 
answers and acknowledgments ourselves. 

In a properly managed bank all letters received which demand a 
reply are, if practicable, answered the day they are received. Those 
letters that are not thus promptly replied to are not the ones containing 
remittances, but are of a special character, and contain enquiries that 
may take some time to attend to. 

In this matter of acknowledging letters, and in the general business 
of remitting checks in settlement of collections, some of the banks are 
getting into very careless and unbusiness-like ways, to which attention- 
should here be called. 

Many of them have of late years fallen into the very objectionable 
practice of "answering" letters enclosing checks, drafts, etc., for 
collection by simply thrusting into the letter received a draft in pay- 
ment, and returning both to the sender. 

A bank which receives a letter ought to answer it, if it needs an 
answer, and then file it away for preservation. This is a simple and 
common business rule, and should not be ignored. 

I heard an experienced bank manager say on one occasion that many 
banks were growing so careless in their management of their correspond- 
ence that he expected they would soon get into the habit of simply 
flinging checks into envelopes in making up returns by mail for 



210 



PRACTICAL BANKING. 



collections sent them, and I have in fact known banks to do just that. 
The practice of acknowledging all letters containing checks has been 
partially abandoned on the ground that the endorsement of the checks 
therein, which are made payable to the receivers of the letters, is a 
sufficient acknowledgment of their receipt. But this can be the case only 
where the endorsed checks are sent back to the remitter after cancel- 
lation and payment, which return is not a general rule. 

It seems to me, in these times of cheap postage, the system of 
general acknowledgment should be revived, and if postal cards have 
any place in a bank's correspondence this carrying a simple acknowl- 
edgment is certainly the safest and least dangerous use for them. 

Labor-saving methods in the correspondence which are not unbusi- 
nesslike may be adopted ; thus banks in the country, in sending their 
daily remittances by mail, or in any way by letter, to their correspond- 
ents in the Clearing-House cities, have, within late years, adopted, in 
some cases, the plan of helping forward the hard morning clearing 
work of their city banks by listing the checks enclosed in the letters 
in question in the following way (see Form 51). All the checks enclosed 
which are to go into the morning Clearing-House settlement are entered 
upon a slip of the proper length of which this is simply the heading : 



RESERVE NATIONAL BAM 

TsTEW YORK. 
Iteceive for Deposit for Account of 

THE FIRST NATIONAL BANK, 

Lincoln. Me 189 








c 


. 



Form 51. 

Upon the letter itself a record is only made of the gross amount of 
these checks. Drafts, notes, etc. , which may be contained in the letter 
are recorded upon it separately. This method greatly helps along the 
Tellers, etc. , in the city corresponding bank, and is one which may be 
recommended for adoption where the situation is of the character I 
have described. 

Mailing the letters is also a matter demanding care ; and here comes 
in a secondary use of our letter register. 

The clerk or messenger who actually mails the letters — takes them 



THE MAIL AND THE TELEGRAPH. 211 

to the post-office — should cheek off by this record all the letters in his 
hands before mailing them. 

The record should be made from the open letter. The checking-off 
should be done from the directed envelope. 

If the mail is large he should have a satchel in which to put the 
letters. 

Before they are mailed he must see that his superior officers have 
properly sealed and addressed them. 

So, also, in handling the letters received. The same care that the 
Messenger bestows upon the outward mail should be exercised in taking 
letters from the post-office and bringing them to the bank. He should 
not let them go out of his hands until they have been delivered to the 
Cashier or his proper deputy. 

Considerable trouble has grown out of the non-observance of these 
simple precautions. 

After the letters are in hand there are still right and wrong ways of 
handling them. 

In opening a batch of letters, cutting off a slight section of the end 
of the envelope and then removing the letter through the opening 
made is a good manipulating method, since by this mode of handling 
the envelope is preserved entire and can be recovered from the waste- 
paper if there is a call for it. 

Every person opening a bank letter containing checks, notes, drafts, 
etc. , should at once see that the letter contains the number of pieces 
it records, and should mark on the letter the date of its receipt. 

Checking-off details, which should be promptly attended to in a 
large bank by the heads of the various departments to which its 
contents belong, is a matter requiring a deal of care. The best way of 
managing this work is for the Cashier who opens the letters to permit 
them to pass at once, with their entire contents, through the hands of 
the Teller, Collection Clerks, etc. , these officers taking out the contents 
belonging to their departments and placing upon the letters their 
initial receipt for the same. The Cashier, or some of his deputies, 
should afterwards see that all the credits enclosed in the letters have 
been duly entered upon the books; and, when the letters have thus 
been entirely discharged, they should be promptly acknowledged and 
filed away. 

The extremest care and the best system are required in the work we 
are describing; for, through openings in the correspondence depart- 
ments, losses by carelessness and dishonesty have often entered into 
banks. 

The Cashier in a bank of moderate size attended to his own 
correspondence, checking off all credits himself before he acknowl- 
edged his letters. He could not have had a better system. Yet he 
had no sooner turned his back upon the Receiving-Teller than that 
officer, with an eraser, altered his original entries; and in the end, 



212 PRACTICAL BANKING. 

with the collusion of the Book-keeper, a couple of hundred thousand 
dollars was stolen from the bank by these two rogues. 

Under the best of systems dishonest men in responsible positions 
can steal and for a while escape detection. 

REGISTERING LETTERS. 

Under the registered-letter system of our mails the banks are in the 
habit of registering those letters which contain cash, bonds, coupons 
and other valuables which are good in the hands of any holder into 
whose possession they may, either honestly, or dishonestly, fall; but I 
have noticed in many cases, where bank officers are endeavoring to 
decide, in absence of instructions, whether or not it is safe and wise to 
send forward negotiable securities by registered mail, there has been 
wanting among them any positive information of what the methods 
and machinery of this registered mail business was — what were the 
risks and responsibilities of the system. Here is a concise explanation 
of these last-named points : 

Registered mails, in the leading cities, generally close twice a day — 
morning and evening. Registered letters are delivered by carriers. 
First, third and fourth-class matter can be registered. First-class 
matter must be sealed; third and fourth-class matter unsealed. No 
matter excluded by law from the common mails can be registered. 
Letters can be registered to domestic or foreign countries. The fee, in 
either case, is ten cents. All registered letters must show upon their 
covers the names of the senders. 

The way of life of the registered letter is as follows : It is placed 
in the mail pouch and its sending recorded, and witnessed, by two 
postal clerks. The locks of the pouches are of a character more com- 
plex — more invulnerable — it is supposed than those on the common 
mail-bag. The registered mail-bag travels in the same way that the 
lower-priced common mail-bag travels — in the same street and railway 
van, and is under the same supervision as the unregistered — no more 
and no less. A receipt for every registered letter is sent by the post- 
master at its place of destination to the postmaster sending it out. 
Every person receiving a registered letter signs a receipt for it, which 
is returned to the sender. 

The Post Office Department assumes no special responsibility for 
the carriage of the registered letter. No recourse to the Government 
can be had for the value of lost registered letters unless the loser can 
prove that the post-office has lost the letter through carelessly violating 
its own published regulations regarding the manipulations of registered 
letters, which last thing it would often be difficult for the individual 
sufferer to do. 

With these extra-valuable, or extra-hazardous, letters the alterna- 
tive would probably be to send by express, which is, of course, much 
more expensive. 

It is an excellent plan to have a bank rule that securities that are 



THE MAIL AND THE TELEGRAPH. 213 

to be sent away for collection, and which belong to depositors, shall be 

accompanied by instructions from their owners, when they are taken 

on for collection, as to whether they shall be sent forward for collection 

by express or registered mail. The receipt of such definite instructions 

relieves the bank of responsibility and, in some instances, of expense. 

There is another point worth alluding to. If it is a good plan to 

register letters of the class we have mentioned, why is it not well to 

go further and register the bulk of the valuable letters which a bank 

mails ? For instance, why should not the interior bank, which daily 

sends to its corresponding bank in New York a letter containing, it 

may be, bank checks to the amount of hundreds of thousands of 

dollars, register such letters ? To be sure, these remitted checks are 

payable to order, and therefore not good in the hands of the wrong 

holder and not available in dishonest hands unless forgery is resorted 

to. At the same time a loss of one of these valuable letters, full of 

negotiable checks and drafts, would cause an immense amount of 

annoyance and trouble to the losing bank; and, if registering them 

would ensure their more prompt and safe transmission, why not have 

it done? 

TELEGRAPHIC CORRESPONDENCE. 

In practical every-day banking a combination of the mail and the 
wire is in frequent request, and often works most admirably. The 
experienced banker is quick to discern where these two agencies may 
be brought together to work towards a desired end, and can, by the 
exercise of judgment and skill, often do better service with this double 
team than with either of them taken separately. Instances illustrating 
this point must readily come to the mind of any banker who reads 
these pages. 

I find, for instance, that I, in Boston, have in New York a balance 
of |100,000, and it is exceedingly desirable that it should be brought 
home to me at the earliest possible moment. I wire to New York at 
2 o'clock to-day to remit, and when I reach my desk at 10 o'clock to- 
morrow morning I find the mail has brought me the $100,000 in Boston 
checks or the express the same amount in gold or currency. 

I have a collection note due in New York to-morrow about whose 
fate I am anxious. I write to New York to-day to wire me to-morrow 
advice of its payment or non-payment, and to-morrow I receive the 
due telegram. 

And so I might go on giving specimens of the endless variety of 
ways in which banks are wiring for answers by mail and mailing for 
answers by wire. 

But let us first note a few practical points. Accuracy to the very 
letter in telegraphing is something that cannot be assured in practical 
telegraphy. Both in domestic and under-the-ocean-wiring occasional 
lapses in letters and parts of words are inevitable. A long practical 
■working experience in this business has convinced me of this fact, and 



a 



214 PRACTICAL BAILING. 

the most experienced managers of wires have also testified to the 
correctness of this statement. In acting upon and working under 
telegrams relative to payments of money, bankers are expected to use 
good judgment and common sense in translating — making out — the 
despatches they receive, and often find it wise to overlook slight 
features of incoherence where the meaning is evidently clear and the 
variation in names only natural and unimportant. Cable wire work 
is apt to be more inaccurate than that on short overland lines. Where 
business of importance hangs by the wires, no undue regard to 
economy of words should be allowed to militate against the clearness 
and precision of telegrams. 

It seems to me that in the matter of financial correspondence by 
wire our bankers and brokers are apt to fall into the habit of clipping 
and condensing too much. 

Telegraphing has so far been an expensive business in this country 
as compared with telegraphing in Europe. In London I found I could, 
by postal telegraph, send twenty words to any part of the Kingdom for 
a shilling. The high rate of our lines have taught patrons an economy 
in words which has sometimes been used at the expense of intelligibility, 
and the use of cipher codes and coined words in telegraphy has en- 
croached upon the profits of the wire lines to such an extent that 
some of them have had in serious consideration plans for prohibiting 
their patrons from using these short-hand methods of telegraphic 
letter-writing. And in one instance, at least, a line having a monopoly 
of business in its region has absolutely refused to receive for trans- 
mission all messages not made up in plain words — straight English. 

In cable work there has always been the most extreme economy of 
words in making up codes for financial and general market reports. I 
have observed many instances where a single word has been made to 
do cable duty for a very minute report of condition of a foreign market 
for money, stocks or merchandise. 

Signatures to cablegrams are charged a word tariff. To avoid even 
a signature expense, knowing patrons of the cable send their corres- 
pondents unsigned messages. A signature in such a case can often be 
omitted just as well as not, for the character of the telegram reveals 
to the correspondent its authorship. 

To constant and regular users of the cable there is an evident and 
pressing demand for an improvement which every day becomes more 
imperative. This is the demand for an international — world-wide — 
uniformity of currency and language. The world of trade and com- 
merce which is daily becoming more and more closely knit together 
by the agency of steam, electricity, etc., must in time become even 
more homogeneous by the adoption of a common language. 

All persons having anything to do with telegrams should remember 
that promptness in handling them — particularly in answering them — 
is of the first importance. The very word despatch, which has 



THE MAIL AND THE TELEGRAPH. 215 

become synonymous with telegram, indicates the imperativeness 
which characterizes messages of this character. 

In banking, these letters by wire have a peculiarly strong claim 
for celerity of movement on the part of all parties. Any banker of 
experience can recall instances where delays in attending to messages 
by wire have sent notes to protest that would otherwise have been 
saved from dishonor, allowed insurance policies to lapse, perishable 
consignments of merchandise to be ruined, and financial embarrass- 
ments and distress to be precipitated. 

All telegrams sent out by a bank should be carefully copied in 
letter press, the same as its regular letters. It is even more important, 
in some respects, that these "grams" should be copied than the 
mailed letters, since the most important of them are often written and 
despatched in a haste which renders errors easy. 

It is the duty of the Cashier of a bank to receive, open and 
answer its telegrams. Yet matters should be arranged in every bank 
to have some person present, if the Cashier is absent, to open and 
reply to despatches at once. When a bank is nominally closed and 
in the hands, possibly, of junior officers, they should be carefully 
instructed to open telegrams addressed to the bank, and see that 
answers are sent if such are imperative. In the case of very important 
telegrams it may be necessary for subordinates to take vigorous 
measures to get them into the hands of Presidents or Cashiers who 
have left the bank for the day. 

The bank was sending a very important despatch to a distant point. 
It was extremely desirable that the telegram should be made abso- 
lutely accurate even to the smallest word. In writing this message 
upon one of the common blanks of the telegraph line the Corresponding 
Clerk called the attention of the Cashier to the mass of rules and 
disclaimers printed upon the margin of the paper, and asked if it 
would not be well in this instance to have the dispatch repeated. 

Without doubt there are many bankers constantly using telegraph 
blanks who never carefully read and weigh their marginal notices. 
But there is always to be found upon them the old provision that the 
telegraph company assumes no responsibility where a message is not 
repeated, and the enquiry of the clerk brought up the point of its 
present binding force. 

This repeating disclaimer, as well as many other notices upon 
telegraph blanks, has been overthrown by the Courts. In the early 
days of telegraphy, when the whole business was a new science, there 
was reason in a provision that repetition of a message must be 
demanded where responsibility was to be assumed, but at the present 
time, when wiring is one of the exact sciences, the telegraph company 
which undertakes to transact business must have operators and 
methods and machinery which will do the wiring work of the public 
with a reasonable degree of accuracy without the employment of such 



"216 PRACTICAL BANKING. 

old-fashioned means as repeating a message. The Courts require the 
companies to be exact in the transmission of messages, and, as far as 
the sender is concerned, will not make him repeat his message in order 
to hold them responsible for its proper transmission. 

My own experience has been that if a message comes through in a 
faulty form, or upon my simple statement that this or that word 
cannot be what the sender intended, the company has very willingly 
secured a repetition from the sending office without any expense to 
either of the parties. 

Here is another point of a character which is undoubtedly quite 
common in the e very-day life of banking that might be illustrated by 
an incident : 

The bank held a lot of bonds of the issue of a "Western township, 
which it had been endeavoring to sell through a banker located near 
the place of issue of the bonds. Failing to make the negotiation in 
question, it sold them near home, and that ended the matter. Some 
time after this closing out it received from some unknown party in the 
"West, who had probably heard of the offer of the bonds at the time the 
bank was endeavoring to sell them, a long and minute telegram, 
making many inquiries about their character and the terms upon which 
they would be sold. This telegram was unpaid. It was of no value to 
the bank receiving it, for, as we have said, the bonds had been closed 
out, and, being sent to the bank by a stranger about his own business, 
he should have paid it. Now, what are the rights of a bank under the 
circumstances, and its only correct course ? The bank has a right to 
xeceive and read any despatch handed to it, and would not find it safe 
to do otherwise, yet it is not obliged to pay for any unpaid despatch 
unless it pleases so to do, provided it returns the same to the Messenger 
Tbringing it, saying it is of no value or importance to the bank and 
that it declines to receive and pay for it. In such a case the telegram 
is returned to the point from which it has been sent, with orders to 
^collect the cost of the wiring from the sender. 

Our telegraph companies, which readily concede to all receivers the 
right to refuse despatches in the manner and for the reasons we have 
.named, hedge against the complication and the possibility of loss for 
work done in good faith by making it a rigid rule never to receive and 
iorward an unpaid despatch for an unknown or irresponsible sender. 
The ' ' collect " messages are always taken with the understanding that 
the sender must pay for them if the sendee refuses to do so. 

It is important to remark here that in the course of business it will 
hardly be safe for bank managers to authorize subordinates to refuse 
to receive unpaid telegrams which reach the bank out of bank hours 
when the managers are absent on any suspicion that the bank ought 
not to pay for them. Very little discretion must be authorized in this 
matter. The amount to be paid is generally small and the responsi- 
bility of refusal is large. The clerks had better take and pay for them 



THE MAIL AND THE TELEGRAPH. 217 

and run the risk of their being valueless despatches which should not 
have been sent unpaid. 

CERTIFYING BY WIRE. 

The bank received a despatch asking if Robert Livingston's check 
was good for $3,000, and to answer at once by wire. The situation of 
the sender presumably was that he stood waiting to take that $3,000 
check from Livingston in payment for values he was giving up to him. 

How shall the bank upon whom this check and message are drawn 
use the wires in this case ? Its answer must be framed with care. 
The simple word "yes" and nothing more was sent in reply. It 
would, as it turned out, have been much better to have sent a more 
guarded answer. 

Trouble came in the following manner: Before the $3,000 check 
reached the bank for collection the cash which made it "good " when 
the telegram was replied to had disappeared — had been paid out on 
other checks of Mr. Livingston's — and Mr. Livingston had failed. The 
bank was at once sued by the holder of the $3,000 check on the ground 
that the "yes" dispatch was a bona fide certification, and that the 
bank, having said the check was "good," could be squarely held for 
its amount. The Court held to the contrary, deciding that when the 
bank said it was "good" it meant only that it was "good" then, 
making no promise to set aside its amount to meet the check whenever 
it should come around, and giving no guarantee that it should be 
"good " at any future time. This decision is, of course, in accordance 
with common sense and equity, yet the style of telegraphic reply to the 
enquiry is not one that can be recommended. In the case referred to 
it entailed upon the sender an expensive lawsuit and a narrow escape 
from final loss. The bank should stand upon the rule that a check 
must never be certified until it is actually presented and charged, and 
the better plan would be to reply ' ' good at the present time " or " the 
drawer has that amount to his credit now," or in some hedging way, 
various forms of which will readily suggest themselves to any banker. 

The sender of such a message has no right to ask for a stronger 
telegram. If he pays money on the strength of it he must do so with 
the risks resting upon his own shoulders. 

Bankers have sometimes attempted to set aside the balance, which 
has thus been apparently certified by telegraph, without the actual 
presentation of the check. Such a course would take on an embar- 
rassing aspect were other checks of the same drawer to press for 
payment before the wired one should come around for the cash. 
There is no doubt but that the holders of such interim checks could 
enforce their payment. 

CODES AND CIPHERS. 
Bankers are almost invariably in the habit of using these in sending 
despatches relative to transfers of funds and purchase and sale of 



218 PRACTICAL BANKING. 

securities. In fact, the general run of the wiring business of a bank 
is of a character involving so much money -value responsibility that 
very little of it can be safely done in plain English. 

From what I have already said it will readily be recognized that the 
cipher answers a double purpose and serves as a short-hand as well as 
a useful and safe disguise. 

In cable work, for money transfers, and various missions, the cipher 
is widely used. 

Not long ago there was sent to a Boston banker a notice of protest 
of a London sterling bill which came to him in cipher. 

The cipher and code-books upon which such important telegraphing 
is based should, of course, the same as other valuables, be kept under 
lock and key by the Cashier. 

SENDING MONEY BY TELEGRAPH. 

But the most striking advantages of telegraphy, as applied to 
banking, are shown in the business of making direct transfers of 
money by telegraph, a method which is daily upon the increase, and a 
description of which must necessarily occupy an important place in 
any treatise upon practical banking. The methods and machinery of 
this business are easily described, for, after all, there is nothing 
complicated nor obscure in transactions of this character, except we 
may apply these terms to that mysterious agency which no one under- 
stands and which no one attempts to explain — the electricity which 
really does the work. 

Many business people who avail themselves of the telegraph in 
transmitting funds to points more or less distant are but little acquainted 
with the exact methods used in making these remittances, yet the 
process is a simple, every-day one. It can be best explained by 
describing an actual transaction of this character — by giving a little 
picture of the business from real life in banking. 

So here is an exact account of some payments by wire that in their 
features happen to illustrate quite fully the most common crooks and 
turns of the money-by-telegraph business. At any rate the reader 
who understands all that I here describe of a couple of wire transac- 
tions in money will readily comprehend the leading characteristics and 
methods of this branch of modern banking, and can cipher out the rest 
of the philosophy and practice of this rapid-transit traffic at his leisure. 

A bank in San Francisco keeps an account in Boston. In opening 
this account it arranged to do a telegraphic money transfer business, 
and sent a cipher or code-book to be used for that purpose. This cipher 
book simply contains an index list of words and phrases which are put 
to what may be termed arbitrary use — that is, the very innocent looking 
words and sentences thus listed stand for amounts and expressions 
entirely unlike their individual selves. This cipher code-book contains 
a translation of its language set off against each word and phrase. The 
California bank retains a copy of the book. Both banks keep the code- 



THE MAIL A2fD THE TELEGRAPH. 210 

book in careful custody — under lock and key and at the command only 
of the officers specially deputed to use it. 

THE CODE-BOOK AXD WIRES AT WORK. 

The man lived in San Francisco. His mother was a poor widow in 
Boston. She was ill — very ill — and she succeeded in wiring her son 
to that effect, and asking for money immediately. The son paid $200 
into the hands of the San Francisco bank and obtained from that bank 
what may be termed a $200 telegraphic check on Boston payable to his 
mother. The San Francisco bank wired the check to its correspondent, 
and here it is (see Form 52), the cipher words and the proper names 
being changed in this copy, because it would not be safe to print the 
original ones. But the words used in the genuine dispatch were fully 
as incoherent and apparently meaningless : 



Thl Wotlru V]h\ohTe.\-L&wkpw C^omp/^hv 



no.- id ill \5 T/Ucoj \Ho. 

Dated (NOJUTflrcUACUCa T LoJL 







Form 52. 
Here is a translation of the despatch, made by consultation witk 
the cipher book : 

" Notify and pay Mrs. Mary Jones, 96 Oak street, two hundred dollars." 

PAYING A TELEGRAPHIC CHECK. 

The Messenger of the bank was sent to the street and number 
named in the telegram in search of Mrs. Mary Jones, the payee. 
Extreme care is necessary in doing this wire-transfer business ; and so, 
in the case in question, the Messenger, to make doubly sure he had 
found the right party, and that the telegram under which he was 
acting was genuine and correct in all points, had some little talk with 
the Mrs. Jones he found at the given number, for the purpose of eliciting 
from her any facts which appeared to corroborate the correctness of the 
transaction to which she was to be a party. 

Any corroboration of the cipher message, no matter what may be 
its nature, is very desirable. 

The whole business of transferring money by wire is considered 
delicate and critical, and, to avoid risks, the utmost care must be 
taken in the discharge of all its details. Persons engaging in transac- 



320 PRACTICAL BANKING. 

tions of this sort are liable to the risks of having their cipher codes 
stolen and used for fraudulent purposes, and to other very evident 
dangers. 

From the lady he learned that she had a son in San Francisco from 
whom she was expecting an immediate remittance. It only remained 
for Mrs. Jones to identify herself — to satisfy the bank that her name 
was Mary Jones. This having been done she was paid the $200 and 
her receipt taken. The San Francisco bank was at once advised by 
mail of the payment. In due time confirmation by mail of the wire 
check must be received from the San Francisco bank ; under a proper 
system a bank does not consider itself done with the payment until 
such a confirmation has come. The transaction I have described is a 
fair specimen of the class of wire payments to which it belongs. 

Here is a hasty description of a wire-money transfer of another 
type, which is also a good illustrative case : 

Brown & Co., of Boston, ask me, a Boston bank, to pay Jones & 
Co., of New York, $100,000 at once by wire. I have no New York 
cipher. I send this telegram in plain English to my correspondent 
bank in New York : 
National Bank, New York. 

Pay Jones & Co. , 10 Wall street, New York, One Hundred Thousand Dollars 
and charge my account. , Cashier. 

My New York bank dare not take any risk with such a telegram as 
this. The reasons for their hesitation must be evident to any banker. 
They are found in the fact that under its present system telegraphy 
is a very loose business. A person can enter any large telegraph office 
and send in any name any decent sort of a despatch to anybody. For 
instance, a boy can go into the office of the Western Union in Boston, 
and send in my name a despatch to any of my correspondents any- 
where, asking the payment to anybody of any sum of money, with a 
request that the same be charged to my account. No remedy for this 
state of things has so far been suggested. The difficulty can only be 
met by setting up some system of identifying senders of messages, 
which at present seems impracticable. 

But, recurring to my New York telegram, requesting in plain 
English the $100,000 payment in New York — returning to it for illus- 
tration of the points in hand — the question at once comes up of how 
shall its correctness — its genuineness — be proved. 

To prove the telegram a despatch can be sent to me, the apparent 
author of the first despatch, over another line, asking if I have sent such 
a message. This precaution is often resorted to. It is a measure of 
prudence, but not one of absolute security, since collusion of rogues 
may defeat its purpose. 

Another solution of the case before us may be reached in this way : 
The New York bank may make the wire-requested payment by taking 
collateral for the telegram — that is, it may pay Jones & Co. the 



THE MAIL AND THE TELEGRAPH. 221 

$100,000 on their depositing that amount of good collateral, the same 
to be held until they receive a mail confirmation of the despatch. 

But the difficulties of the case I have here presented show the great 
advantages of having in use for such a transaction a good cipher code. 

AN IMPROMPTU CIPHER. 

Bankers and others sometimes call to their aid in emergencies just 
described an impromptu cipher. There are many varieties of them to 
use. Any bank, which is in regular daily remitting correspondence with 
any other bank at some point more or less distant, can extemporize a 
cipher which shall serve as proof or identification, of its important 
business telegrams. I have used this method many times quite success- 
fully. Let it send its money -transfer, or other telegram, involving in 
their recognition and action a money responsibility, in ordinary plain 
words, adding, as a key to their real origin, this sort of an expression : 

"Smallest check sent you in ours of yesterday , Philadelphia, $5.75 " 

The bank receiving such a telegram turns at once, if it understands 
this plan, to "ours of yesterday," and if it there finds "Philadelphia, 
$5.75," it concludes, of course, that the despatch is all right. 

I have been amused by instances where I have tried a cipher of 
this description on banks which had never heard of the method. Such 
banks have wired back to me that they had received and obeyed my 
despatch, but did not understand what I meant by my reference to 
the remittance of yesterday. But the reference, though not directly 
understood, had evidently served its identifying and proving purpose. 

There is, however, a dangerous feature lurking in codes of this type 
to which particular attention should be drawD. It will be seen at 
once that a cipher of this character is within the reach of almost any 
officer of the bank. Any subordinate can, in fact, get up at any time 
one of these cipher messages. He has only to take the key from the 
letter copy-book, which is open to the inspection of all the clerks, and 
with it, if it suits his purpose, can easily commit his bank to almost 
anything he pleases. For instance, a defaulting officer may send to 
the bank's correspondent at any point the following message : " Please 
pay John Jones one hundred thousand dollars and charge same to our 
account. Smallest item in ours of yesterday, Philadelphia, ten dollars. 
Signed, R. Smith, Cashier." And if such dispatch was obeyed, as it 
might be, some confederate of the defaulter could take the money and 
a trusting bank be to that extent the loser. 

This is only one more illustration of the dangers environing the use 
of the telegraph in business relating to responsible action. Banks 
cannot be too careful in the matter in question. Those institutions 
which are very careful about locking up their code-books, and allow 
them to be opened to but few eyes, have been known to fall into the 
habit of using ready-made ciphers which were at the command of every 
man or boy in their bank. 

The large telegraph companies have very complete and exact 



222 PRACTICAL BANKING. 

methods of doing this money-transfer business. It is with them put 
in charge of an expert and reliable officer termed a Transfer-Clerk. 
He receives all money to be remitted by wire, writes the transfer order 
Mrnself, in the company's cipher, and hands the same to an operator 
who has not the least idea of the character of the message he is 
sending. This message, after reaching the point of the money-transfer, 
is repeated back to the sending Transfer-Clerk to guard against all 
frauds and errors. A standing rule with them is that all transfers not 
called for within forty-eight hours after the reception at the paying 
office will be canceled, and the amount, less premium and tolls, 
refunded to the sender. All applicants for transfers of money have 
to leave their signatures. 

We remark further, in the matter of these transfers, that the volume 
of this sort of business done in the East is not extremely large. Our 
bankers, as a general thing, do not care to go into it at all, and what 
they do consent to do is rather performed as a matter of accommoda- 
tion than otherwise. But in the far West, particularly in the mining 
regions, the bankers all advertise their willingness to do this kind of 
business, and the amount of it transacted by them is very large. 
When Mr. John Oakhurst, of Roaring Camp, or either of the two men 
of Sandy Bar, wish to make a remittance to the East, they always go 
to the Western Union telegraph office or to some banker who uses 
the wires. 



EXCHANGE AND LETTER OF CREDIT. 223 



CHAPTER XIV. 

EXCHANGE AND LETTER OF CREDIT. 

Many persons fail to understand the movements of and dealings in 
exchange, which are such leading features in practical banking. Sterling 
exchange appears to some the most difficult thing in the world to 
clearly understand even in these days of such active international 
banking. National banks all over the country are placing themselves 
in a position to draw bills on London. A proper explanation of the 
money movements of the class we have named ought to make them 
perfectly easy of comprehension by any person capable of under- 
standing the simplest arithmetical problem. Here is all that need be 
said in explanation of the sterling exchange business: 

The legally set-up par value of a pound sterling is with us $4.86.65. 
If I am in New York and owe £1,000 to a party residing in London I 
look about me to see how I can pay the debt in the cheapest way. If 
I can buy a sight sterling bill on London for the £1,000 at $4.90, or 
less, I buy the bill and remit it to my London creditor, and that ends 
the matter. If I cannot buy the bill named without paving more than 
$4.90 for it, I ship to my creditor in London £1,000 in cash gold, or 
that value in American coin. 

I ought, however, to note here that, if I am banking in sterling 
exchange to very large amounts, I might, perhaps,' be willing to remit 
gold rather than pay even $4.89.50 for bills. The influence at work to 
bring me to a decision whether to export the gold or remit the sterling 
bill is the expense of "handling the gold as found in the following bill 
of costs for shipping gold from New York to London : 

Freight — J- of 1 <$>. Insurance — $- of 1 $. Cooperage — Too small to 
consider. Abrasion — From nothing to ^ of 1 $ on $20-pieces ; -J- <f to £ </ 
on $10-pieces and £ $ to i </ on $5-pieces. 

If a party in London owes me £1,000, I collect this debt by selling 
my sight sterling bill on him for the £1,000 if I can get $4.83 for it. If 
I cannot get at least $4.83 for this bill it is more profitable for me to 
collect it myself in London, of course through correspondents, and 
have the gold shipped to me, to be sold here at its market value, unless 
it should be American coin. The cost of bringing gold from London 
to New York is the same as from New York to London. 

I have made my illustrations show the principle ; but, in even so 
standard an article as gold, the actual demand in the London or the 
New York money market will affect its value — at least its value for 



224 PRACTICAL BANKING. 

financial uses — and this value of the moment must be ascertained before 
making close figures on a large transaction. 

The philosophy of movements in domestic exchanges is just the 
same as that described as underlying the sterling exchange business. 
A brief explanation of domestic exchange methods may make my 
descriptions of sterling transactions more easily understood, since the 
domestic exchange matter is free from that confusing element — a dif- 
fering currency. In sterling exchange we have to do with a mixture 
of dollars with sovereigns ; in domestic exchange we have a dollar at 
both ends of the route. Here is an account of a domestic exchange 
transaction, which is an every-day occurrence with me, that will give a 
good idea of the whole circle of the domestic exchange business : 

I, a bank in Boston, owe a bank in New York $100,000, which must 
be paid at once. I seek for a check on New York, and, if I can get 
one without paying more than fifty cents per $1, 000 for it, I pay my 
New York debt by remittance of the New York check. If I cannot 
buy the $100,000 New York check without paying more than fifty cents 
per $1, 000 for it, I send the New York bank the gold or legal-tenders, 
for I can do this by paying not over fifty cents per $1,000 for the 
transportation of this cash to New York. If I have owing me in New 
York $100,000 which I may collect at once, I draw my check on New 
York for the same and sell it in Boston, if I can do so at a cost not 
exceeding fifty cents per $1,000 discount. If I cannot sell this $100,000 
New York check without allowing more than fifty cents per $1,000 
discount, I send the check to New York, draw the gold or greenbacks, 
and import the same to Boston. This I can do for fifty cents per $1, 000. 

It will be observed that the variation in exchange between the two 
points — that is, the difference between the extreme quotations, which 
is necessary in order to change the route of the gold or legal-tenders — 
is just $1, or twice the sum I have assumed to be the cost of its 
transportation one way. In my sterling figures the same kind of 
exchange variation existed. 

It is easy to perceive, looking at the exchange operations between 
Boston and New York — looking at them from the standpoint of Boston 
— that exchange on New York must be low when Boston is selling New 
York more goods than New York is selling Boston. 

When New York exchange is low in Boston we say that it is in our 
favor — that the balance of trade between the two cities is in favor of 
Boston. This happens, for illustration, when Boston, which is the 
centre of the manufacturing interest of New England, is selling heavily 
of her mill products in New York, and buying lightly there of that 
city's foreign goods, shares, bonds, etc. At such times gold and legal- 
tenders flow in large amounts from New York to Boston, moving over 
by the great express routes. A situation of the domestic exchange market 
which is the reverse of this will be understood without explanation. 

In just the same way exchange on London is low in Boston and 



EXCHANGE AND LETTER OF CREDIT. 225 

New York when the balance of trade between the United States and 
England is in our favor. The balance of this trade is in our favor 
when we are sending England more in value of our produce — wheat, 
cotton and provisions — than we are importing from England of her 
manufactured goods — or, I might say, of the silks, woollens and fancy 
goods of the whole of Europe, for our pay for all is settled through 
London bankers. 

When this is the condition of affairs all our bankers who deal in 
sterling exchange are ready to sell their bills on London, and there are 
few buyers, hence low quotations for exchange, and, as in my sup- 
posed case of the £1, 000 due me in London, the drafts, or the debts, 
are collected there and the gold is shipped over, so that when London 
exchange is low here gold comes flowing in upon us from Europe. 
When, from causes the opposite of those described, we are buying of 
Europe largely, and sending her little of our wheat and cotton, London 
exchange is high with us and gold moves Eastward — flows from New 
York to London. There are, of course, other elements that are 
influences. When our United States bonds and other American securi- 
ties market themselves abroad they make, to the extent of their value, 
exchange in our favor. When Europe gets alarmed over American 
securities and begins to send them back upon us sterling exchange 
feels the movement. And it is, of course, a movement not in our favor. 

There are several terms relative to sterling exchange which are 
often heard on 'Change and read in the papers which should be under- 
stood : 

Bankers' bills of exchange are bills drawn by bankers upon bankers. 

Commercial bills are those based upon movements of merchandise, 
and drawn by merchants. 

Documentary bills are those which are accompanied by the bills of 
lading. 

Posted or nominal rates for exchange means the rate daily posted 
upon the bulletins of the dealers in exchange for the use of the general 
public. 

Actual rates are the real terms — the inside terms made to brokers 
through whom most of the trades are made. 

Whatever may be the rates of exchange between domestic points,, 
o** between New York, London or Paris, there will always be a demand 
at both ends of the route for bills of exchange — for checks, drafts and 
letters of credit payable at the other point. The retail exchange busi- 
ness of the globe will always be transacted by the use of paper credits. 
It matters not what may be the rates of exchange between New York 
and Boston, as far as the necessity of a certain supply of checks and 
bills of exchange for use between these two points is concerned. New 
York bankers must always be in readiness to draw on Boston for their 
customers, and Boston must always be able to draw on New York, and 
New York and Boston banks and bankers must always be able to draw 



226 



PRACTICAL BA^KIXGr. 



on London — to draw drafts and to issue letters of credit for travelers 
for use in Europe. To meet this convenience demand our New York 
and Boston bankers, when exchange is against them, must ship gold 
to London, even beyond payments of their debts, and on these gold 
credits draw for merchants and tourists. 

LETTER OF CREDIT AND CIRCULAR NOTE. 

Within the last few years there have been introduced very many 
improvements in the methods and machinery of the traveling credit- 

Circular Ietter of Credit. 

#124500 (^C^UMJU/ *? /y 



ytatns/ .Jj^ ^^^^M]|ss R . s BRmvN, Shipley & C?' 

LONDON: ^a^^^J^^^^ui^jCt, (M 124500 




Form 53— lirst page. 

supplying business, and every day competition is bringing new ideas. 
Leading American houses in the foreign credit line issue drafts in sums 
to suit on over 600 places in Europe, Asia and Africa. They also 
furnish blank drafts printed in all the leading languages. 

The ordinary Letter of Credit is, however, the leading and usual 
instrument for the use of travelers in Europe, etc. , and has now be- 



EXCHANGE AND LETTER OF CREDIT. 



227 



eonie such a common feature of banking that a special explanation of 
the methods of issuing these elastic and indispensable bills of exchange, 
and also of using them, is certainly in place. 

For the better information of the reader, we print a fac simile of 
the first and second pages of a Circular Credit except as to paper, tint, 
size, etc. (see Forms 53 and 54), which will give a much clearer and 
better idea of its form and availabilitythan any mere written description. 

The first page is the Credit proper, authorizing the various cor- 
respondents of the house, who are named on the third and fourth 
pages (some four hundred in number), or any other banker to whom 



Date when 
paid. 



paid. 




Amount In figures. 












*Zo 



/Ai v clja>j8a/iv»A *l<Aa^k*cl 













Form 54— second page. 

the letter may be presented, to pay the holder of the Credit, whose 
signature is given on its face, to the extent of £500 sterling. 

The second page of the Credit shows how the holder availed him- 
self of the amount, commencing his trip at Liverpool and ending it at 
Cork, whither he embarked for home. 

As stated, there are nearly four hundred names and places upon the 



228 PHACTICAL BANKING. 

indication list attached to the Credit, covering the entire civilized 
world, so that, with one of these Credits in his possession, the traveler 
can journey from place to place and make the entire circuit of the 
globe, and never have in his pocket gold, silver or paper money more 
than is necessary to pay his immediate expenses. 

Our banks and bankers, who are in this Letter of Credit business, 
issue them upon the satisfactory introduction and identification of appli- 
cants upon terms which are usually of about this character(see Form 55) : 



A.— Against Casli payment [for sums of £500, and over), without allowance of interest, 
but free of commission, at selling rate of exchange for demand bills on London on 
the day of issue. 

The unused portion of any such Credit will be refunded at purchasing rate of 
exchange for demand bills at the time of its return. 

B. — For a Commission of 1 per cent, upon the amount used, as follows : 

1. — Against Cash, payment (for sums under £500), without allowance of interest, 

at selling rate of exchange for demand bills on London on the day of issue. 

The unused portion of any such credit will be refunded, with its proportion 

of its commission, at purchasing rate of exchange for demand bills at the time 

of the return. 

2.— Against the Deposit of an approximate amount of cash. Re-drafts willbe 
charged in account at selling rate of exchange for demand bills on the day 
they are received. On deposits of $2,500, or over, interest will be allowed at 1 
per cent, under the current value of money for call loans, but not exceeding 
h per cent, per annum. 

3.— Against satisfactory guarantee of repayment as drafts appear. 

4. — Against deposit of sound marketable securities. In the absence of any 
other provisions for the re-payment of the amount used, the securities willbe 
sold as required to pay sums drawn under the Credit. For making such sales, 
or for the collection of interest or dividends on such securities, a charge of % 
per cent, commission will be made. 

These Credits, bearing the signature of the holder, afford a ready means of 
identification, and can be availed of wlierever hs may be in sums to meet his 
requirements. For this purpose the Credits are specially addressed, and the 
traveler thereby accredited, by an indication list attached, to bankers of the best 
standing in all parts of the world. 

Letters of introduction should, in all cases, bear the signature of the person introduced. 

Form 55. 

The terms quoted above are those of Messrs. Brown Brothers & Co., 
of New York, Philadelphia and Boston. 

Wherever he may be the Circular Credit of such a house as Brown 
Brothers & Co. is the " open sesame" to the bankers vault to get the 
' ' wherewithal " for his needs. The risk of loss of money is reduced to 
a minimum. If the Credit should be lost the chance of its being used 
by any one else is very remote. In an experience of thirty years the 
writer can only recall one or two instances where the finder, or stealer, 
of a Circular Credit successfully made use of it. All the safeguards 
that the experience of these many years has suggested are thrown 
around the security of these Credits. 

The value and convenience of these Credits, as compared with a 
Bill of Exchange, is in the fact that the holder carries the means of 



EXCHANGE AND LETTER OF CREDIT. 229 

identification with him, and that he can avail himself of the amount 
in just the sums needed to meet his requirements. 

As stated in the circular above quoted, these Credits are issued 
against •' Cash deposits, or satisfactory guarantee of repayment." 

In the first instance the traveler deposits his funds with the banker, 
getting a credit for an equivalent amount. Upon his return to this 
country, if there is any unexpended balance of the original amount, it 
is refunded to him. In the other case, ' ' satisfactory guarantee of repay- 
ment, " the traveler arranges with his bank, or some one else satisfactory 
to the banker, to guarantee repayment to the Letter of Credit issuer. 

SETTLEMENTS. 

If your Credit has been issued against guarantee of repayment, as 
your drafts are paid in London the banker will redraw upon your pay- 
master in America upon the following form (see Form 56), so that when 
you return home these statements will afford you particulars of the 
amounts drawn and paid without necessity for a further statement : 



WHEN REMITTING PLEASE BE PARTICULAR TO MENTION THIS NUMBER. 

No. 35\6 

new yokk March SI 1890. 

Messrs. John Brown & Co., New York. 

Dear Sirs : 

Oxir Dondon Souse having paid the 

Draft of Mr. H. R. HUSted, under Credit No. , for....£20, 

please remit us in settlement thereof as per Statement at foot. 
We are, Yours respectfully , 

DROWN BROTHERS & CO. 



Amount of Draft £20 

Disbursements £20 % 4.90 % 98 

Commission 1 %. 98 

Interest, etc 30 days % 6 % 49 

$ 99.47 



Form 56. 

Should your Credit have been issued against cash deposited, on 
your return the banker issuing the Credit will account to you for the 
undrawn balance in accordance with Article A of the circular. 

THE LETTER OF CREDIT IN USE. 

When a banker issues a Letter of Credit, the party purchasing it, 

and who is to use it abroad, places his signature upon a lower corner 

of the document before he leaves the office of the banker, and writes 

it in the banker's presence. He also leaves with the drawer of his bill 



230 PRACTICAL BANKING. 

others of his signatures. We will suppose, for instance, that a party is 
proposing to travel in Europe, and is buying therefor a Letter of Credit 
on Barings, London. In such a case he leaves with his American 
drawing banker two of his signatures, one of which the banker forwards, 
with the advice of the drawing, to Barings, London, and the other, 
with advice of the drawing, to the Paris agents of Barings. When 
the bearer — the payee of the letter — reaches the drawees in London, 
or their agents in Paris, and asks for a payment on account of it, he 
signs his name, in presence of the London or Paris drawees, upon a 
draft for the amount he is collecting; and if, upon comparison of 
signatures, there seems a satisfactory agreement, the traveler, without 
any other identification, is paid his money and goes on his way. 

The careful reader must see at once that there is a risk attendant 
upon the identification practice which we have described. What is to 
prevent a dishonest holder of a lost or stolen Letter of Credit from 
practicing upon the payee's signature upon the bill in his hands, and 
thus prepare himself to make, upon demand, when he presents such a 
bill, a very perfect forgery of this signature of the honest payee. 

There is also connected with this customary sole dependence upon 
the signature identification of a Letter-of-Credit payee a more patent 
danger. The letters in question are made payable at the agents of the 
drawers at hundreds of minor points in all parts of the world. These 
sub-agents have not even possession of a previously forwarded signa- 
ture of the payee, and must depend alone upon a comparison of the 
signature offered by the payee with his signature as shown on the letter 
which he brings in his hand. 

These points of danger in this matter of identification of Letter-of- 
Credit holders, are in a measure avoided by a practice now coming in 
vogue with our most careful foreign bill drawers of placing squarely 
upon the face of every Letter of Credit issued by them a most careful 
description of the payees. 

Here is one of these Letter-of-Credit pictures of a payee (see Form 
57), which we have copied from a Bill of Credit drawn by the " Ameri- 
can Exchange in Europe, Limited : " 



Age --$<? At-ft-oo^a 3 jvu^j^XLk. Chin .^RjlxljlAI^^ 

Statue— .-5 JUt. h>\ ^., Sa^^Jv. Hair Sboo^C JLa^g^>^ 

Forehead tfLLcJL - Complexion. JLLiJd: 

Eyes GLkjo^jjl... -~ - Pace— .TR/uuuv^Jl o^o^SL wLSL 

Nose JVL^JLL^ . A^Lp., ^xJJlb. Particular Marks 4>ooov. JU.- 

jtUxit - t^juj^ UJcXi^ o^J. XJLu^A 

MOUth JVLlxLLa^*. — - -— l_XJO^a_iLA_ xJL jK^aJLt .Lo^^A 



Form 57. 

The routine one goes through, in foreign lands, in drawing money 
upon his Circular Credit is a simple one. An explanation of a single 



EXCHANGE AND LETTER OP CREDIT. 231 

transaction will make the matter very clear and I will, for illustration, 
take a personal reminiscence, which covers the most difficult sort of 
case which is likely to come up in this drawing business : 

I was in the Lake District of England — in Keswick. There was a 
small bank there. I had never before been in the place, knew no one 
there, and was not known by any one. I was getting out of funds. I 
entered the little bank, presented my letter of credit for £500, and 
asked the Manager if he could let me have £50 on it. He looked at 
this Letter of Credit, and said, pleasantly, that he did not know me, and 
that the last time he made an advance to an American upon an 
American credit he lost his money. The day after his payment the 
issuers t of the Credit (Duncan, Sherman & Co.) failed, and he never 
heard more of the payee. He asked if I could give him time to wire to 
London about the payment. I told him I could not, as I was to leave 
Keswick at once. He then asked me to draw my check on the bill. 
His bank was not upon its list of payees, yet, after comparing my 
signature on my check with that of the Letter of Credit, he readily 
paid me the £50. 

The bankers of England are always ready to cut red tape when 
they can do so without incurring too great a risk, and, as I have said, 
they are willing to rely upon signatures as a means of identification. 

The traveler wishes, of course, to avoid by all means the misfortune 
of losing or mislaying his Letter of Credit. He should have a special 
receptacle in which to carry it, and it is important that it be kept free 
from wearing and defacement. 

I will assume that my reader is looking forward to his trans- Atlantic 
trip ; and in the rough experience of travel among strangers, in many 
lands, he may find this homely hint relative to the care of his funds of 
some value. 

You will be pretty sure to place your watch, money, Circular 
Credit, etc. , under your pillow at night. But, in order to escape the 
awkward mishap of leaving these things where you have slept, use one 
of your hose as a wrapper for them. You will not be likely to travel 
far without that. 

If you should have the misfortune to lose your Circular Credit there 
need be no serious trouble (though the loss may be embarrassing) if 
you make prompt use of mail and wire to stop its payment at head- 
quarters. 

When abroad you will often meet those who will say you must be 
careful not to lose your Letter of Credit, and inform you that if it is lost 
the loss will be yours to the full extent of the face of the credit. They 
are confident that a dishonest finder of the letter who should forge 
your signature and draw the money would inflict its loss upon you and 
not upon the parties who cashed it ; and they tell various stories of 
how travelers in England have lost all their traveling funds in this. 
way. These statements are incorrect. If you lose your Credit Letter 



232 PRACTICAL BANKING. 

notify at once the parties upon and by whom it is drawn. Whoever 
cashes your bill upon a forged signature loses, and not you, provided 
you have not been negligent in putting them on their guard. This 
incorrect impression as to who shall be held responsible comes from a 
misapprehension of a peculiar law of England. The origin and charac- 
ter of this law is as follows : 

English bankers became disgusted with the law and custom requir- 
ing that the payers of checks drawn to order should demand an identi- 
fication of the parties collecting them. Checks payable to bearer could 
be paid without risk and responsibility on the part of the bank ; but, if 
the checks payable to order were paid to the wrong person on a forged 
endorsement or anything else, the bank was the loser. The banks 
pressed Parliament to make a law putting both classes of checks on 
the same footing, and such a law was enacted. 

' ' To-day, " says a bank Teller of London, ' ' I pass out the money for 
all checks presented as fast as I can to whoever presents them. My 
only care is to assure myself that the drawer's balance and signature 
is all right." 

When told that in the United States identification was demanded of 
all parties collecting checks, no matter whether the checks were pay- 
able to order or bearer, he smiled. He said they never could get 
through with their banking business in London if they attempted to do 
it that way. This remark is true, because there are so many people 
there and so much to be done in a short time that a person can hardly 
see how they get through at all. 

This is the check situation in England to-day: If a check is 
dropped in the London streets the first man who picks it up can rush 
into the bank and collect it and pocket the money. But to collect 
money fraudently is a great crime. England punishes such a crime 
severely. The severity of its laws and the promptitude with which 
they are enforced are great safeguards in business matters. 

The man who loses a check in England must make lively time to 
stop its payment. Until he has stopped its payment he is in the same 
position he would be if he lost so many Bank of England notes or 
sovereigns, and the person who loses a Letter of Credit anywhere must 
make quick time in stopping its payment if he would not incur great 
responsibility. 

Every traveler's Letter of Credit has attached to it a long list of 
banks and bankers where it may be presented and advances obtained. 
Pew travelers are aware that this list is merely suggestive. The fact 
is, it is to be understood that the bill can be presented and payments 
negotiated with almost any banker of standing in any country named on 
the bill. It is hard to imagine any civilized country on the face of the 
globe that is not glad to purchase from you a reliable sterling draft on 
London. Such drafts should sell at a premium almost anywhere. A 
Boston man, just returned from a tour around the world, says he 



EXCHANGE AND LETTER OF CREDIT. 233 

always received a premium when he drew on his Letter of Credit at 
points distant from London. 

American bankers have also introduced a foreign money-order 
system by which an exact amount may be delivered free of expense 
into*the very residence of the recipient in places both small and large 
in almost all parts of the civilized globe. The business of paying 
money by telegraph has also been greatly perfected by them. 

A popular and very convenient money-supply for foreign travel 
which has of late come much into use is known as the Circular Note. 
These notes are payable in all the leading cities of Europe, and are 
issued in denominations of £5 and £10 or their equivalent in other 
European currencies. 

An ingenious endorsement plan has been adopted by the issuers of 
the Circular Notes. Holders of such notes are required to endorse 
them with a certain word of identification, given by the issuers, so that 
in case of loss none but the party possessing this identification word can 
realize upon them. 



234 PRACTICAL BANKING. 



CHAPTER XV. 

A CHAPTER ON CHECKS. 

A bank cheek is in many respects the same thing as an inland bill 
of exchange. When it is made payable to bearer, it passes by delivery. 
It is, in general, subject to the rules which regulate the rights and 
responsibilities to parties to a bill of exchange. 

Many of the leading characteristics of a bank check are so thoroughly 
well understood by every one who is likely to handle such a document 
or read this volume, that there is little need of enlarging upon them, 
but here are a few points relative to their various features that are 
not familiar to all: 

The absence of a date upon a check does not warrant a bank 
in refusing to cash it. Checks ought to be dated. It is very much better 
that they should be dated. It is somewhat irregular not to date them. 
Nevertheless I should never refuse to pay a check that was all right in 
other points simply because it bore no date. If I could readily send 
it back to the drawer, and get him to put in the useful date figures, I 
should do so. Otherwise I should pay it, and duly charge it to the 
drawer's account. 

Here is a good form of the ordinary every-day common bank check 
now in use (see Form 58). It may serve as a text for the explan- 
ation of a great many points of interest and importance in relation to 
checks. 



3fo. iggoi Chicago, A M^ul «JsO 1 8SL& 

>alayfiialil^aiik<a^iu^ri^ at 




T CHICAGO 



j£^?^U^*Jt 



t ^C^t^t^f ^ ^^-ZsPtZ+J '/ZWt-jJs /io 






Dollars, 



Form 58. 

Notes made and executed on Sunday are invalid, but a check so 
dated is not invalid, and a bank has no right to refuse to pay it on 
that account. This is common law and common sense. Making and 
issuing notes on Sunday smacks of trading on that day, but a person 
may be really obliged to draw a check on Sunday — as, for instance, 



A CHAPTER ON CHECKS. 235 

for some charitable or religious object or to pay a minister $50 for 
preaching on an exchange. 

In many States the death of the drawer of a check renders it 
legally uncollectible at the bank upon which it is drawn. Banks are 
really paying checks every day which have been signed by parties 
deceased. In very many cases they have no means of knowing that 
death has legally stopped such checks. Such dead checks are per- 
fectly good against the estates of the drawers. 

In States where grace prevails the statutes usually declare that 
there shall be no grace allowed on checks on banks — make these an 
exception to the general law providing for grace upon notes, drafts 
and bills of exchange. 

The popular or dictionary definition of a bank check is that it 
is an order on a bank for the payment of money. Some authorities 
who discuss this point take the ground that the document in ques- 
tion to be a bank check — a legitimate and regular bank check in the 
eyes of the law — must be an order for the immediate payment of 
money. Under this ruling they hold that an order on a bank for 
the payment of money at some time in the future — one that is 
drawn on time — is not a check, but a bill of exchange or draft ; and 
that, being such, it is as much entitled to grace, where grace on 
inland bills prevails, as if it was drawn upon persons or a person or 
upon any concern or corporation which was not a bank. 

This view is not the generally accepted one among our banks, nor 
is it, in our opinion, correct. A check on a bank, whether it reads 
payable at sight, on demand, or at some named date in the future, 
is, if we may so express ourselves, a check in the eyes of common 
and statute law, and in the opinion of the bankers and business 
men through whose hands it may pass. It is simply a bank check and 
nothing else. 

Where laws prevail which declare that checks on banks shall not 
be entitled to grace, these orders for the payment of money by banks 
which we have described are payable without grace. 

In the matter of signatures to checks the laws which I have elsewhere 
given as governing signatures to notes prevail. They may be signed 
with pen, pencil, or with a mark. 

HOW TO DRAW CHECKS. 
The person who keeps a regular open bank account should use in 
checking upon his balance a check blank of uniform type, taken from 
his regular book and no outside source, consecutively numbered, and 
signed with a uniform signature. His check figures should always be 
supplemented with written ones. He should use good black ink, 
and endeavor to lay the ink on so strongly that it will sink well into 
the fibres of the paper. The invariable quick use of a blotting paper 
upon freshly drawn checks has a serious objection. It prevents the 
new-laid ink from sinking into and becoming, as it were, part and 



236 PRACTICAL BAI^KING. 

portion of the paper, and leaves the check from which it has quickly 
taken the wet ink lightly and indistinctively impressed with its words 
and figures. The use of sand in place of a blotter can hardly be 
tolerated in common work, yet it has its advantages, since it adds to 
the strength and force of the fresh writing. 

Dr. O. W. Holmes, now 80 years old, says : "I turn back to a record 
of my birth, made by my father the day I was born, and find the sand 
shining upon the entry seemingly as fresh as if it had been flung there 
but yesterday." 

In drawing checks it is well, if possible, to let the newly-written 
■ones stand for a while, to permit the ink to imbed itself, before you 
press on a blotter. 

In filling in the written amount of a check commence the writing 
well to the left, drawing a heavy line over any space left open to the 
right. 

Prefixed alterations are generally more dangerous, easier made and 
harder to distinguish than affixed ones. 

A check drawn for one hundred dollars can, if the writing leaves 
an open space on the left, easily take on a prefix of twenty, making it 
twenty-one hundred dollars, while any affix would be made with 
considerable difficulty. 

The reader who takes the trouble to make experimental studies of 
the above point will find it well taken. 

But in whatever way the words of the amount are inserted, take 
all the necessary precautions against fraudulent change by hedging 
them well in with fencing lines. 

The apparently very simple matter of filling up a check for a 
fraction of a dollar is well worthy of separate mention. 

Checks for sums inside of a dollar are not an uncommon thing in 
business. I have seen many that were for a small part of a dollar 
pass through the exchanges of a bank. Some of these were signed 
by an official used to the faces of very heavy figures — signed by the 
Treasurer of the United States or his deputies. 

There hangs in the office of the Pacific Mills, Boston, the cancelled 
check of the United States for one cent. 

Messrs. Hewins & Hollis, of the same city, have framed and hung 
in their counting-room one drawn by the same official for the modest 
amount of two cents. 

The other extreme in checks, which naturally comes to mind in 
this connection, may be seen in the noble old Bank of Commerce, 
New York, where there hangs on the wall a handsomely framed and 
splendidly drawn check for $14,000,000, signed by the solid house of 
Kidder, Peabody & Co. 

But the matter in question is the best method of filling up a check 
for a fraction of a dollar — a filling-up business that is really not so 
easy as it seems. If any of these little checks are made out awkwardly 



A CHAPTER ON CHECKS. 237 

they are either suggestive of alteration to a larger sum, not easily read 
at a glance, or open to some other "Paying-Teller criticism." 

Here is, I think, the very best form (see Form 59) of the little check 
in question that can possibly be devised : 



%Seventy-five cents. new york, April 10, is90. 

First National Bank, of New York, 

Pay to A. B. Carter - or bearer 

= Seventy-five cents ..- Dollars 

* J 100 

Day, Knight & Co. 



Form. 59. 

In filling in the above check a line should be drawn with pen and 
ink through the word Dollars. 

Checks of many styles of filling up and endorsement very often 
come under our observation that are quite as objectionable as they 
are peculiar. 

He came to me with a check payable to "self or order." He wished 
the money, but refused to put his name on the back of the check, 
although he was the drawer of the check which he had made payable 
to ' ' self. " It required no little wearisome talk to convince him that 
it was a poor way to frame a check, but that, having been so framed, 
he — ' ' self " — really ought to put his name on its back. 

Another person presented a check filled out payable to "order of 
bearer," which he had taken from the drawer of the check. It was 
difficult to convince this bearer, who was an identified party, that the 
expression "order" in the check seemed to demand bearer's endorse- 
ment. We refused to pay the check unless this endorsement was 
furnished, and so it was reluctantly given to us. 

Still another brought a check payable to order of "J. R. I., 
Treasurer of Halifax Mills," and endorsed precisely thus with the 
initials. We asked him to put on his full name, as Treasurer, as we 
are never willing to receive these equivocal initial endorsements. We 
always demand a full name, and then, as the greater includes the less, 
we get the initials and full name also. He persistently argued that we 
were wrong, yet finally did as we requested. 

There are only two proper ways of drawing checks. Draw them 
either "to order" or "bearer." When drawing "to order" say 
nothing about "bearer"; when drawing "to bearer" say nothing 
about "order." And when drawing "to order" draw "to order" of 
clearly-described party. If to an individual, give his usual style of 



238 PRACTICAL BANKING-. 

name ; if to a Treasurer or Agent, fill in what he is Agent or Treasurer 
of, and require of these endorsers a conformity with the face filling. 

"ORDER OF JOHN DOE OR RICHARD ROE." 

Banks often issue certificates of deposit payable to the order of 
either of two parties named as payees. They also draw checks upon 
corresponding banks with what may be termed alternate payees — one 
of two named as just described. And particularly in our large cities 
it is an every-day practice with many bank depositors to draw checks 
upon their balance in favor of either one of two parties — to the order, 
as it were, either of John Doe or Richard Roe. The checks and 
certificates of deposit which we are describing are regular and fully 
negotiable instruments. When presented to Paying-Tellers for pay- 
ment the endorsement of either one of the payees is sufficient and 
constitutes a satisfactory receipt for the money. This is a common 
sense and common law view of the case. 

Our attention has been called to a decision of the Court of Appeals 
of the State of Maryland to the effect that such instruments as we 
have named are not negotiable, because they are made payable in the 
alternative to one of two different persons, and so have not that 
certainty in respect to payees which the law requires to make them 
negotiable. If this decision was made it was incorrect. 

We repeat, any bank is justified in cashing a check made payable 
to the order of John Doe or Richard Roe on its endorsement by either 
said John Doe or Richard Roe, and any other view of the matter is 

absurd. 

SAFEGUARDS AGAINST FRAUD. 

Safety devices to prevent the fraudulent alteration of checks are on 
every hand and of endless variety. The canvasser for any one of them 
can demonstrate in a few moments that all except the particular one he 
represents are of not the least value; and when the merits of his 
invention have in turn been demolished by the next agent it becomes 
pretty difficult to determine as to the amount of safety gained by 
the use of any of them. 

A suggestion has been made that banks might protect themselves 
against the forgery of checks which they use if they would adopt an 
engraved check-plate of the highest style of art. And the further 
suggestion has been made that all the National banks of the country 
use a uniform engraved check-plate of the class named, prepared with 
movable dates and locations. 

There are no very serious objections to these suggestions. Were 
they adopted these between-bank checks would, as far as engraving, 
paper, etc. , are concerned, have a sort of National bank bill character. 
But any hope to ensure absolute protection against forgery by the use 
of these nice plates and this uniform style would be fallacious. The 
National bank bills upon whose plates and paper so much mechanical 
skill has been bestowed have been very successfully imitated. There 



A CHAPTER ON CHECKS. 239 

are in circulation counterfeits of these bills which have been made so 
accurate that they have escaped detection and are still doing circulation 
duty with the genuine notes. 

Checks made like bank notes would be more open to forgery, since 
their frequently immense value and their movable features in the way 
of names and dates would render them more liable to fraudulent 
assaults. 

There has not been a preventive against forgery and alterations 
invented up to the present time which has not been successfully 
assaulted by swindlers. These so-called safety contrivances tend to 
make Tellers and others who are daily called upon to cash checks 
incautious about the men who present them, and thus they become 
sources of danger instead of a protection. 

The drift of the most advanced practical bankers in this matter of 
safety in check forms is towards the use of a plain black and white 
check, drawn upon clear white paper with good strong black ink, 

ERRORS IN DRAWING CHECKS. 
There are often presented to banks for payment, checks in which 
the figures in the margin are at variance with the amounts stated in 
writing in the body of the checks. This discrepancy — this error — has 
been made inadvertently by the signer or filler up of the check. Here 
is a specimen of a check (see Form 60) of this irregular character : 



$ JO. 3 



6o r?**£**-n 



WBER 



■ -^§p^ 777 ^» 



Qy /sfJ^-^J^^/^^tZL' /ZLsOtZO ~&UAscZl 



tt%J38awrtcftJ2ational Sank t&f(^f 
Jfo. i8 52Qe fiostoifofflass^- ^Z_ 




CASHIER. 



Form 60. 

Now, how does it stand ? How shall it be treated ? The law 
governing cases of this sort provides distinctly that the writing shall 
control. And a bank would, therefore, be legally justified in paying 
the larger amount, as written in the body of the check. But, 
practically, in such cases as this, the drawee — the bank — hesitates; 
and, if possible, in order to avoid trouble and losses, holds the settle- 
ment of the check in abeyance until, by conference with drawer, 
endorser, or somebody or other who knows what the check really was 
intended to be drawn for, a correct settlement of it can be reached. 

A bank confronted with a check where the written amount was less 
than that stated in the marginal figures would, of course, be more 



240 PRACTICAL BANKINGS 

inclined to settle the matter at once by paying the smaller sum than it 
would to pay the larger amount hi the case used as an illustration. 
DRAWING CHECKS ON CORRESPONDENTS. 

Banks in the leading towns and cities of the United States are often 
called upon to draw for their dealers and others checks upon New 
York, where many of them keep a portion of their reserve and where 
about all of them find it very convenient to keep an open account, 
since New York is the financial centre of the country. To the many 
outsiders, who are applying often for small New York checks, it is well 
to apply the rule of making a small charge for thus drawing, no matter 
what may happen to be the course of exchange. Such a charge is a 
perfectly legitimate one. This sort of drawing is a trouble and expense 
to the drawers, and throws work and responsibility upon the drawees. 

I do not think it safe for banks to make a practice of drawing such 
small checks for strangers — for persons not identified. I have known 
of cases where such small checks have been purchased of banks simply 
for the purpose of fraudulent use — to raise to larger amounts. Great 
care should also be taken in making these checks — care as regards the 
paper upon which they are drawn, the style of filling up, the character 
of the writing, and figures, since any neglect in these points entails 
risk and care upon drawees ; and, in case of loss, possibly responsibility 
upon drawers. 

All New York checks, or checks upon any correspondents, should 
be issued payable to the Receiving-Teller, and by him endorsed, since 
he is the officer who receives the money for them and makes upon the 
books of his bank the original credit entries, and since, also, such a 
countersigning is a check against fraudulent issues of checks. 

It is an excellent thing to make it a rule to issue all such checks as 
we are describing payable by endorsement direct to the party who 
takes them instead of to a third party to whom it is to be sent. By so 
doing their history, in case of need, is more readily traced. 

It is also an excellent plan for the Teller who countersigns these 
checks to repeat their amount in writing on their backs directly over 
the signature of the Cashier. This repetition in such a place helps to 
prevent alterations. 

ADVICE OP CHECKS DRAWN. 

In England, checks drawn between banks — that is, checks drawn 
by banks in London upon their branches in other localities, and upon 
other banks, and checks drawn by branch banks and other interior 
banks upon banks in London — are issued in company with advices 
of their drawing, which are at once mailed or wired to drawees. 

English banks are in the habit of comparing all the checks presented, 
of the type we have named, with the advices of their drawing, which 
they are supposed to have on file. 

Regarding checks of individual depositors, the same practices 



A CHAPTER ON CHECKS. 241 

prevail in England as here. No advice of the drawing of such is 
usually given — none is wished for or expected. 

In Canada, until within a very few years, there prevailed no system 
of check inter-advice between the central banks and their branches. 
But some very extensive frauds which occurred there a few years ago 
in the way of raising checks that had been drawn by Canadian branch 
banks upon the head banks in Montreal led to the general adoption of 
the English system of advising bank checks upon banks. In Canada, 
as here, individual checks upon banks are not advised. 

Under the National and State banking system of the United States; 
there is no general habit of giving advice of the checks which one 
bank draws upon another, or which individuals draw upon their banks. 
In those exceptional cases where banks are advised by corresponding 
banks of the checks which they draw upon them, the drawees who 
receive such advance notices are suppposed to compare carefully each 
check presented for payment with this description of it placed in 
advance before them. But the methods of check-settlement have 
now become so complicated and the volume of this business has so 
increased that this advice is very exceptional, and, where it is still 
adhered to on the part of drawers, the practical result is that few 
payers are able to watch, compare and be governed by these advices 
in the daily transactions of a large banking business. Embarrassments 
sometimes arise from this system of advice that are quite troublesome 
to Paying-Tellers and other officers. Correspondents who advise their 
checks sometimes fail to get these advices into the hands of the banks 
upon which the checks are drawn in advance of the time of their 
presentation — fail through errors and delays of their own or the mails. 
The question then arises with the bank upon which the checks are drawn 
whether or not these checks shall, if they appear all right in other 
points, be duly honored in spite of the absence of the usual advice. 
Intelligent bankers do not hesitate long over such a question as this. 
They pay the checks and wait for an advice to come afterward. So 
that, even where an advice system is in use, errors and delays such as 
those named and the difficulty of keeping a run of advices received 
often combine to make the advice feature a dead letter with the paying 
banks. Their Tellers gradually fall into the habit of paying all checks 
as presented without regard to the fact that some of them may be drawn 
by correspondents who are accustomed to advise. In view of these facts, 
and as our banks have made up their minds to mainly rely for saf etjr 
upon a system of identification of check collectors and a careful watch 
over the signatures and general filling-up of all checks presented to them, 
it might be wise for banks and bankers to give up altogether this old- 
time practice of sending out the between-bank advices in question. 

THE ISSUE OP DUPLICATE CHECKS. 
This is a very common thing both in banking and general business. 
Banks are continually being called upon to issue these duplicates to< 



242 PRACTICAL BANKING. 

<dealers who have taken from them their checks on corresponding 
Ibanks and lost them by mail miscarriages or in some of the various 
T ways in which drafts disappear. 

Banks often call upon their dealers for duplicates of checks received 
rfrom them in the routine of business and lost in process of collection. 

The leading points relative to this business of giving out duplicates 
are as follows : In the first place the bank or individual who is asked 
to issue a duplicate check has a right, warranted by law and custom, 
~to demand that a reasonable time shall have elapsed before such a 
request is entertained— that is, that such a considerable period shall 
Jiave passed since the check disappeared in the mail or in some other 
way that there seems no probability of its coming in sight again. 
Circumstances must settle how long this time shall be. 

The applicant for a duplicate check is supposed to be the party 
•who has been so careless or unfortunate as to lose it ; and this applicant 
must expect to be called upon to give a bond of indemnity in exchange 
for the duplicate — a bond to hold the issuer harmless and secure against 
loss in case the original turns up and becomes a claim against the drawer. 

Individuals furnishing a duplicate check to a well-established 
foank are generally satisfied — and justifiably so — with taking from 
the bank a simple receipt for the check, in which is incorporated a 
guarantee against loss in case the original comes to hand. Banks 
furnishing duplicate checks between themselves for one another are 
satisfied with a receipt of this type. All experienced bankers thor- 
oughly understand these points, and hold themselves in readiness to 
.give in exchange for the duplicate a bond guaranteeing the issuer 
against loss which may be the outcome of the accommodation. 

Some time ago a valued correspondent wrote me that he had lost in 
the mails a couple of my dividend checks — checks which had been 



SIXTEENTH NATIONAL BANK. 

BOSTON 4sjX^uA^. 12 18cp. 

In consideration of the <^_AfjtA_A_A*_V?v. JSx>Jtu&_A^oJl Bank, of Boston, 

having issued to ^^^J^d. Tfc. 3CcdULoutX, xJL Tf^ouJdl^, X. c y_. 

two duplicate checks for ten dollars each, said checks being for 

JSjcl. 3 & A^ooocLft_Aj^A joJL jxjLo^sl JL<x>^X payable to the order of 

ffccouoLal Tfl 3CcJUloucX the said- ^o^oLJL "B. 3LJULucX 

doth hereby promise to hold said Sixteenth National Bank harmless from any 
and all loss, cost or damage which may be incurred by reason of its having to 
pay the original checks, it being claimed that the said original checks are lost. 

Signed, Sbo^x^jJL Tft. dtaJh^k. 



Foim 61. 

made payable to order and duly endorsed back to me for collection. 
They had been lost more than a month, and so it was reasonable 



A CHAPTER ON" CHECKS. 243 

for the loser to make the application for the new checks. Knowing 
the systematic character of my correspondent I stopped payment of 
the original checks and at once sent him the duplicates, simply saying 
to him that I should be pleased to have him incorporate in his 
acknowledgement the customary guarantee. This he did, giving me 
a filled-out form (see Form 61), which I consider a good one to use 
under the same circumstances. 

This transaction at once called to the mind of myself and officers a 
query of long standing regarding our post office administration : Why 
is it that the postmasters of the period do not heed the instructions 
that every careful bank has printed in the corner of all its mailed 
envelopes, and which read as follows: 

If not called for in 5 days return to [here follows name of the bank]. 

For many years I have been cognizant of frequently-recurring losses 
of letters thus stamped that have without doubt been caused in almost 
all cases by the misdirection of the letters by my officers; and yet it 
has been exceedingly rare for me to find the corner stamp of any 
account. The letters seldom come back from the post offices in which 
they are held under a wrong direction ; and, in due course of time, 
we are forced to begin the tedious work of getting duplicates for its 
lost contents. 

In some flagrant cases of postal neglect of the character in question, 
which I have followed up and investigated, I have written to the 
Postmaster-General for an explanation of these failures to carry out 
instructions. The invariable reply has been that all postmasters are 
rigidly instructed to obey the corner stamp, and that the department 
requested immediate notice of any violation of that plain duty. 

CERTIFICATES OP DEPOSIT. 
These are practically a bank's check on itself ; and their issue in 
payment of an obligation, or when based upon non-interest paying 
deposits, is, of course, a source of direct profit to a bank. Many of 
them are liable to remain outstanding a long time ; and the certificate 
of deposit account of some of our large city banks, made up of the 
aggregate of these items, is oftentimes an amount which is looked upon 
with no little satisfaction by the managers. There are one or two 
points relative to the issue of these miscellaneous certificates which bank 
officers should keep closely in mind. Deposits can be taken from 
entire strangers for any amounts, even the smallest, and certificates 
issued thereon with entire safety if these points are carefully attended 
to. A good blank certificate form must be used — good in its manner 
of getting up, good in the way of filling up, and good as far as the 
paper is concerned. A bank which fails in giving proper attention 
to these points may thereby inflict direct loss upon itself, or loss upon 
innocent holders of these certificates, which may be, and in many 
cases has been, thrown back upon the issuing bank. For, if there is 
anything about the issued certificates that encourages fraud, in the 



244 PRACTICAL BANKING. 

way of raising their amounts, etc., common law and common sense 
will place the loss arising thereby upon the careless bank. 

In issuing certificates payable to strangers, take their signatures 
upon the margin of the certificate book, so that, when the certificates 
come home for redemption, the endorsement may be compared with 
this original signature, if it seems necessary. 

Also, make it an iron rule to have every returned certificate checked 
off with its original margin to see if it agrees in amount. By doing 
this, absolute safety is obtained against paying certificates which have 
been raised. There is no other method which will insure this safety ; 
for raising can now be done with such skill, on almost any paper, 
as to absolutely defy direct detection. 

Of course every properly managed bank has a ledger account of 
certificates of deposit issued, which is a full record of the amounts 
and names of all certificates issued, together with dates and numbers. 
Returning certificates can be compared with this record as they 
present themselves through clearing and over the bank counter before 
they are cashed ; but to my mind the more convenient way to guard 
against the danger of being defrauded by raised certificates is the one 
I have before suggested — that of prompt comparison with the stubs. 
I have also suggested that the signatures of the payees of certificates 
be taken at the time of the issue of the vouchers, so that, in this way, 
help may be furnished to the Tellers in the matter of identification 
when the payees present the certificates for redemption. But I do not 
mean, by this suggestion, to indicate that in this, or any other case, 
resemblance of signatures is to be considered final and satisfactory. 

There are so-called experts who hold themselves in readiness to 
settle very weighty matters — even those of reputation and life and 
death — by the testimony of a man's handwriting. But the expertest 
experts of the day, in the matter in question — the experienced Paying- 
Tellers of our banks — are the last persons willing to swear away a 
man's life or good name on judgment made up from the study of 
disputed signatures. Handwriting evidence is good collateral testi- 
mony ; but it is not testimony of the iron-clad class. 

I have in mind several quite ingenious persons with a talent for 
imitating signatures, who can write your name so that you would find 
it hard to disown it if brought casually to your notice unaccompanied 
with circumstances which might lead you to doubt its genuineness. 

There is a curious . feature connected with the issue of demand, 
non-interest-paying certificates by banks of high standing, particularly 
those located in large places. And this is the fact that there are 
always outstanding, upon the books of such banks, very many of these 
vouchers of quite an old date and of considerable amounts. 

There seems to be a fairly good-sized class of individuals who 
appear to be undecided what to do with their money; and some of 
these seem to be in the habit of taking long years to come to a decision, 



A CHAPTER ON CHECKS. 245 

if we may judge from the certificate of deposit accounts of some of our 

old banks. 

ENDORSERS AND ENDORSEMENTS. 

The endorsers of a check stand in a promissory-note relation to it. 
To hold them on a check which is dishonored, a demand and notice — 
a regular protest — is necessary. Due diligence must be used in 
making the demand and in sending the notices to the endorsers. 
Broadly speaking, a check is always good against the drawer. Yet 
here is an exception. If, by want of exercise of due diligence in 
collecting, the drawer suffers — loses something — he may claim damages 
from the careless holder. I have known of a case where a man gave 
his check for $5,000 to a party, who carried it in his pocket for some 
days. During that time the bank upon which the check was drawn 
failed, and in failing locked up for a small dividend the entire balance 
of the party who had drawn the check in question. Had the check 
been presented at once it would have been paid; as it turned out, it 
was never paid. Venlict : Careless holder loses. 

A bank may demand an endorsement of a jcheck payable to order 
before certification. A bank may refuse to certify for an unidentified 
endorser. Banks may demand identification of the holder of endorsed 
bearer-checks. 

In endorsing it is always best to write across the back of the check, 
draft, etc. , rather than lengthwise. By so doing the vouchers are left 
in better form, for the affixing of other called-for names; and, further, 
such a location of the endorsement is in accordance with well-estab- 
lished business custom in this matter, and seems to bind the name 
more strongly to the form and figures of the paper. The Teller who 
cashes the endorsed checks expects to find the payee's name thus 
placed, and it seems to him and to everybody else better placed than if 
sprawled lengthwise on the document. In endorsing, one should 
always gravitate towards the top of the check if there is any proba- 
bility that the paper is to travel further and bear more endorsements. 
Thus, when a bank issues to its customers checks which are payable to 
and endorsed by its Teller, the Teller's countersign should be well up 
towards the top of the paper. It is easy, and also important, to 
recollect that the top of the back of a check is its left face. In an 
ambitious manual for business men published in this country I find 
the following bad advice in regard to making endorsements: 

Always endorse a check just as it appears on the face. For instance, if the check 
is payable to "G. Read" endorse "G. Read;" if to "Geo. Read" endorse "Geo. 
Read ;" if to " George F. Read " endorse " George F. Read." If the spelling of the 
name on the face of the check is wrong endorse first just as the face appears and below 
it the proper way. For instance, the check is payable on face to " George Reade ;" 
endorse " George Reade," and below this first endorsement write what it should haVe 
been, "George Read." 

No person should endorse a check that is supposed to be his — to be 
made payable to him— in any other way than by writing his own name 



246 PRACTICAL BACKING. 

— his legal name, spelled in the right and proper manner. It matters 
not that the name may be spelled differently — wrongly — in the face of 
the check. He should allow the error to go no further — should give 
it no countenance. If the payer of the check is satisfied he is paying 
it to the right person he does not wish a wrong name — a name, 
perhaps, that does not really have any relation to the paper upon 
whose back it is put. If the check is to go further through the 
exchanges, a guarantee of the endorsement of the payee will be all 
that is necessary to make it regularly negotiable and satisfactory. 

THE USB OF STAMPED ENDORSEMENTS. 

An authorized stamped endorsement is as binding as a written one. 
Nevertheless, there are to be found among our bankers and business 
men those who have a prejudice against the stamped signature, and it 
is almost impossible to obtain their acceptance of it. 

But the use of the stamp is daily becoming more and more common, 
and law and common sense sustain it. The weak point about a 
stamped endorsement is that it cannot, like the written signature, bear 
that silent testimony of genuineness which handwriting always gives. 
In case of contention, positive proof of the genuineness of the stamp 
must be established. Where the signature is a written one it may, in 
some instances, prove itself by its face appearance, though it must be 
acknowledged that expert testimony in the matter of handwriting is 
apparently growing more and more out of favor. In getting up a 
stamped signature the practice of engraving and printing fac similes 
is very generally indulged in. The result is, perhaps, more tasteful 
and impressive than that reached in making a simple type stamp to 
print the name in use; out the imitation is no more binding and 
authoritative than the plain type. 

Some of the banks in Boston, Philadelphia and other cities refuse 
to accept stamped endorsements upon the backs of checks received 
through the Clearing-House in the daily course of settlements. In 
New York the use of such stamped endorsements is universal. No 
bank there thinks of refusing them. I hold that a stamped 
endorsement is just as good as a written one, if made by the same 
authority ; and in these home interchanges through clearing, where it 
is easy to prove reception of the check through proper avenues of circu- 
lation, there is little or no danger in the use of the printed endorsement. 

But I recommend the written endorsement as far safer for use in 
the case of transmission of out-of-town collections. 

ENDORSEMENTS BY TREASURERS. 

Here is a point in check endorsing and paying that is not often 
alluded to, but which is of a good deal of importance, since it shows 
that some improper and misleading practices prevail among business 
men who are holding positions of considerable responsibility. 

The Paying-Tellers of our banks are being constantly called upon 



A CHAPTER CN CHECKS. 



24? 



to cash checks payable to order of companies — corporations — of all 
sorts. Such checks require, of course, the endorsement of those 
companies. But they are often found coming forward for the cash, 
bearing upon their backs the simple endorsement of some individual, 
who has trailed after his name the word Treasurer without any specifi- 
cation of what he is Treasurer of. 

Now, it should be generally understood — advertised — that such art 
endorsement as this is irregular and unsatisfactory. 

The payee of the check is a specific company, and that company- 
should endorse the check — should endorse it in about this manner,, 
though the form may be varied to suit individual tastes: 
New York Sand Blast Company 
by 
Peter Smith, Treasurer. 

If, instead of so endorsing it, Mr. Smith, who may also be the> 
Treasurer of the First Church, at Mount Holly, or the Springvale- 
Horse Railway Company, simply puts, on the back of the check,, 
' ' Peter Smith, Treasurer, " who is to say in what Treasurer capacity 
his name stands there ? 

Individualism should have the least possible prominence in the 
matter of check drawing, and in the business of conducting corres- 
pondence, forwarding collections, etc., etc., where corporations are 
concerned — that is, being directly dealt with. 

In sending a letter to the Fourteenth National Bank, New York,, 
of which Mr. Robert Jones may happen at the present moment to be 
Cashier, address the letter Fourteenth National Bank, and not R. 
Jones, Cashier ; and in endorsing all to-be-forwarded collections follow 
out the same principles. 

Individuals are somewhat evanescent ; corporations have long lives,, 
and seldom change their names. 

Here is another case where the objection arises from a fault of an 
exactly opposite nature. 

The check was neatly and correctly drawn, and a good check as far* 
as its face was concerned. Here is a/ac simile of it (see Form 62). 



/ado. 



Dolls. 



Cts 



Boston, MJi>£LJg3d.^ 



7 



OL^OSTON^ATIONAL BANK. 

/.to^^ _ or order 

To the Cashier. v -.C^£^Z^.j!g^^<5iMa^ 



Form 62. 

But the Teller brought it to me, stating that he had sent it through: 
clearing to the bank upon which it was drawn, and that the bank had 



248 



PRACTICAL BANKING. 



returned it to him saying, that it would not pay it unless I furnished 
it with a guarantee of its endorsement. Turning to the back of the 
check, to find out what was objectionable about the paper, I found an 
endorsement of this character (see Form 63) : 




Form 63. 

The obnoxious " signature " was the " Jones Despatch Company," and 
there can be few more objectionable ways of endorsing than the one 
that had been adopted by the said Despatch Company ; and the drawee 
bank was certainly justified in asking for a guarantee of it. 

This unwise custom of putting on as an endorsement, or using in 
any place as a signature, the name of a Company, without in the least 
individualizing it by signing by an agent, Treasurer, or attorney, seems 
to have been upon the increase of late, and is actually adopted by some 
^ery experienced business parties. The practice cannot be too strongly 
•condemned. Doubtless the "Jones Despatch Company," in the case 
just given, would be held responsible for such an endorsement as we 
have described if they had authorized some one thus to sign for 
them. But the awkward feature of the business lies in the fact that 
in case of any dispute or complication it might be difficult to prove the 
-correctness of the "signature" — difficult to establish its authorship 
and its authority. On the other hand, if the Despatch Company 
-endorsed by its Treasurer thus, "Jones Despatch Company, by R. 
Jones, Treasurer," the check would pass along through settlements 
without question as far as its endorsement was concerned. Every 
properly organized company has a Treasurer, and that Treasurer is the 
only proper party to endorse and promise for it, unless he is absent, in 
which case it is usual for the President of the company to sign in his 
place. In the by-laws of corporations the provision is generally made 
that the President shall sign in place of the Treasurer in case of need. 

GUARANTEES OF ENDORSEMENTS. 
The question of whether or not special guarantees of what may be 
termed ' ' irregular " endorsements of checks are to be required, as the 
•checks pass along from bank to bank, in their process of collection of 
the bank upon which they are drawn, is one which is being continually 
•discussed in banking circles. The point raised is, in brief, this: Is 



A CHAPTER ON CHECKS. 



249 



the bank in New York, which sends to me, in Boston, a check on a 
Boston bank for collection with endorsements as follows (see Forms 
64 and 65), responsible, without giving me a special guarantee in the 
premises for the correctness of the endorsements that precede its own 
last endorsement ? 




Form 65. 

In some cities, notably in New York and San Francisco, most, if 
not all the banks, take the ground that, in making an endorsement for 
collection on a check as shown in the above form, they guarantee — are 
fully held for the endorsements above them. 

On the other hand I find that Boston banks will not pay a check of 
this character unless it is accompanied by a special guarantee of the 
correctness of the "irregular" endorsements — a guarantee which must 
be furnished by the last bank through which it comes to them for 
collection. 

The embarrassments of the situation regarding this question arise 
from the fact that there has not been, so far, what may be termed a 
direct and positive legal settlement of the question we are discussing. 
But it would seem as if common law and common sense would support 
the view that the last endorser is responsible for the endorsements above 



250 PRACTICAL BANKING. 

hiru. If such is the case — if he is held without positively so express- 
ing himself by a special guarantee — there can be little objection on his 
part to giving a special guarantee, when parties paying the check take 
a different view and ask for the special guarantee. 

To be pugnacious over inconsequential points is not, certainly, in 
the case of busy and ever-harrassed bankers, the part of wisdom. 
They should always be ready to make concessions for the sake of 
easing the friction of banking machinery where such concessions can 
be made without the sacrifice of principle or the assumption of risks. 

Some English bankers and financial writers are in the habit of 
using a — to us — rather unfamiliar word in this connection. 

Not long since I received a check for collection from a Canadian 
bank which bore upon its back an irregular endorsement — an endorse- 
ment which, to use an expression common with us, needed a guarantee 
from the correspondent through whom it had passed to us for collection. 
This correspondent made the needed guarantee in this novel form : 

Now, what is the difference between the words endorsement and 
endorsation? Why had this Canadian bank dropped the former term 
and adopted the latter? There is a decided difference, and in this 
difference the Canadian found a reason for allowing endorsation to 
step into the place usually occupied by endorsement. 

Endorsation means act of endorsing ; the endorsement is the result. 

There seemed to the Canadian no need of guaranteeing the endorse- 
ment. There it stood, finished and entirely legible. 

But the endorsation — the right of the party who made this irregular 
endorsement in this precise shape to do this act — was what needed 
behind it the regular guarantee. 

And, though this form of ' ' endorsation guaranteed " may not come 
into general use in premises such as we have described, it cannot be 
denied the merit of being, after all, strictly correct. 

GUARANTEEING AN ABSENT ENDORSEMENT. 
There is another technical form of guaranteeing the back of checks, 
which is in common use among bankers, that sounds strangely, but 
which is, after all, quite difficult to improve upon. A check reaches 
a bank through responsible parties, who are not its payees, without 
bearing the needed payee's endorsement. The drawees conclude to 
pay without demanding the absent endorsement, since such a demand 
would cause considerable delay and trouble; they decide to cash the 
check if the presentor will " guarantee the absence of the endorsement.' 1 ' 1 
This is the form to which we allude and it would be affixed as follows : 

the signature being that of the presentor. Over-particular bankers 
sometimes say that such an expression of the guarantee is absurd, since 



A CHAPTER ON CHECKS. 251 

the absence in question is clear enough without any guarantees. They 
say that what is wanted is a guarantee against loss and trouble which 
may result from the absence of the endorsement. 

The form of guarantee they have in mind is one which is very diffi- 
cult of expression, and the condensed form we have given means just 
what they asked for — that the guarantor will hold himself liable for 
any loss or damage which may be the outcome of the irregularity we 
have described — an irregularity which is simply the absence of a proper 
endorsement. 

Thus this common form, though technical in character, covers the 
ground fully, and the correctness of its use is well established. 

In many cases the need for such a guarantee may be avoided. 

To illustrate. A man in Boston received in payment of a bill of 
merchandise a check upon a bank in New York for $500. The payee 
of the check, a merchant in Kansas, had mailed it to his Boston 
creditor without endorsing it. The Boston dealer endorsed the check, 
guaranteeing the absent endorsement, deposited it in a bank, and the 
bank repeated the guarantee of the absent name and forwarded it to 
its New York corresponding bank for collection and credit. This New 
York bank returned the check, saying that the check could not be 
collected unless properly endorsed by the payee ; that guarantees of 
absent endorsements would not be taken by New York banks. In the 
present case, where the depositors of the check were perfectly respon- 
sible parties, and the check was all right except in the point of payee's 
endorsement, it seemed an awkward thing to send the paper away 
back to Kansas for rectification. So the Boston bank asked the 
depositor of the check to endorse the check for the payee as follows : 
"John Jones [Jones was the payee] by Smith & Roberts" [Smith & 
Roberts being the Boston depositors of the check]. After this endorse- 
ment the Boston bank put on its ' ' endorsement correct " and sent the 
check forward for collection, and the New York bank collected it and 
passed it to its credit. 

Again, a concern receives from correspondents remittances of 
checks payable to its own order — checks which it is, of course, desirable 
to have passed at once into its bank for collection and credit. But 
there happens to be no member of the payee house at home to endorse 
these checks. What shall be done ? The employees of the house in 
question may not be in any immediate need of the funds represented 
by these checks, but they rightly wish to have them put at once on 
the path of collection and credit for account of their firm. 

Let the clerks pass them at once into their bank, marked upon 
their backs "Deposited for the credit of the payees;" and, to avoid the 
bother of an absent endorsement, let them endorse them for their firm 
— their firm by themselves. As the checks are to be credited to the 
payees, and as the proceeds of these checks, when once passed to credit 
of payees, cannot be drawn from the bank except on draft of the 



252 PRACTICAL BARKING. 

payees, or their authorized attorney, it becomes perfectly safe and 
regular for the bank receiving them to guarantee these informal 
endorsements, and pass them along for collection. 

Perhaps the circumstances are such that it is not possible to take 
advantage of either of the suggestions I have made. I recall such a 
<?ase and the way it was handled. 

The check was drawn on a Boston bank for $20,000. It was sent to 
me, in Boston, for collection by a bank in New York. The New York 
bank had received it from a corresponding bank in Toronto, Canada. 
It lacked the endorsement of the original payee, a house in Toronto. 
Unable, of course, to collect without this missing endorsement, or 
some responsible guarantee in its absence, I at once wired to the New 
York bank for instructions, and asked whether I should guarantee the 
absent endorsement or return the check. The New York bank, a 
prompt and most systematic correspondent, at once answered as follows : 

" Obtain a certification of the check, and then send it to the Toronto bank, with a 
request that they obtain the endorsement and return the check direct to you for col- 
lection for our account." 

This is good banking — a way out of an error that could not be 
improved upon. By this method of handling the check a risk was 
avoided by obtaining the early certification of ' ' good when properly 
endorsed," and much time saved by sending the lame check direct to 
Toronto. 

In this illustrative case a very important duty is made prominent — 
in fact, two duties. One is the necessity of wiring for instructions in 
critical and unusual circumstances; the other the duty of always 
obtaining the certification of the kind I have named where checks are 
refused simply on account of missing or informal endorsement. 

Banks sometimes forget to ask for this certification — a certification 
which no bank ought to refuse under the circumstances described. 
QUALIFIED ENDORSEMENTS. 

While it is a good plan to make every check payable to the order 
of some one, it is not a good idea to have them so drawn as to seem 
to require what may be termed a qualified endorsement — that is, by 
accompanying the order to pay by any statement or description which 
would make the payee furnish something more than his simple 
endorsement. I am sorry to say that this practice is quite too common 
with check-drawers. Here is an illustration of this point : 

I draw a check upon a New York bank, written payable to the 
order of some other bank, with the additional expression, "for credit 
of Smith & Jones, of Chicago," and remit the said check to the bank 
named as payee. This last-named bank, in receiving and collecting 
the check so made payable, ought, to be strictly correct, to endorse 
it just as it is made payable ; but it does not do so ; and so it is better 
not to have it so drawn. 

Perhaps you send a check to a New York publisher in payment of 



A CHAPTER ON CHECKS. 253 

your subscription to his journal, and on its face write after his name 
as payee "For subscription to Jan. 1, 1891." 

When he deposits that check for collection he simply endorses it 
with his name, saying nothing about the purpose for which it was 
remitted him. To be strictly correct, he should endorse it as it is filled 
out; but he does not do so; and, consequently, it ought not to have 
been so filled up. 

All this descriptive and qualifying matter should be put in the 
letter accompanying the check, and not in the body of the check itself. 

There is another reason for avoiding these descriptive matters in 
drawing a check. The payee who receives a check drawn to his order 
in payment of a bill, or for services rendered, which matter is fully 
written out in the body of the check, may not wish to have the fact 
thus expressed — fully known to every one through whom the check 
passes on its way to collection and to the bank upon which it is drawn. 

The following incident, which transpired in one of our National 
banks a while ago, amusingly illustrates the complications which 
may arise under such objectionable orders to pay. The man presented 
the check at the desk of the Paying-Teller and demanded that it be 
cashed. It had been originally drawn in a proper manner, but the 
payee had endorsed it over to the holder, who was now trying to collect 
it, in something after this style : 

Pay to the order of Henry Brown in full for all demands against me for 
services rendered by him. 

Mr. Brown had, according to his own statement, deliberately pasted 
a piece of white paper over that portion of the order to pay which 
embodied the receipt in full for services rendered, and on that adher- 
ing paper had made the plain endorsement of Henry Brown. 

The check clearly showed that the paper had been thus pasted on, 
and the presentor honestly explained what was under it, saying that 
he was unwilling to sign the receipt which he had thus covered. 

The Teller refused to pay the check, claiming that it had not been 
endorsed at all — that the payee had simply endorsed another piece of 
paper and pasted it on the check. 

The holder of the check took it away and subsequently returned 
with it with the added paper removed and his own endorsement upon 
the check, but the objectionable receipt crossed out by his pen. 

As the check was but a small one, the Teller finally concluded to 
pay it in this mutilated condition — to take the risk of its settlement, 
though he would have been perfectly justified in refusing to cash it in 
its altered condition. 

STOPPING CHECKS. 

A full description of the check had been left with the bank (its 
number, date, amount, and endorsements, as far as known), accom- 
panied by a written order to stop or refuse its payment, the person 
making this request having discovered that it had been stolen or 



254 PRACTICAL BANKING. 

miscarried, and wishing to make it valueless in the hands of wrong 
parties. At the present time, when such vast numbers of checks are 
drawn, and almost all money settlements are made by the use of checks, 
while it is easy for a bank to receive and place on file a notice such as 
the one described, it is exceedingly difficult for the bank to undertake 
to insure stopping the payment of a genuine check. This matter 
is daily growing more and more embarrassing to banks, especially in 
large clearing cities, where checks center representing the business of 
an immense circuit. Careful bants attempt to hedge by distinctly 
declaring, when requests to stop payments are presented, that they 
will endeavor to obey the "injunction," but cannot promise to do so. 
In some banks notices are conspicuously posted reading as follows: 
"While this bank will use due diligence, it will not be responsible for 
checks paid, although payment of the same has been stopped." But 
waivers of this description have no legal force. An order from the 
drawer of a check not to pay it is as binding on a bank as one ordering 
the bank to pay it — as the check itself before it is stopped — provided 
b>oth orders are drawn in a formal and proper manner. The only way 
out of the difficulty is, that if it becomes evident that banks cannot 
safely conduct business under laws and customs binding them to stop 
checks, legislation must be called in to help them by enactments that 
shall relieve them of the responsibility in question. When London 
banks could no longer get through their daily mass of check paying 
under laws and customs requiring them to procure identifications in 
cases of order checks, Parliament relieved them by a law permitting 
them to pay without identifications. The legislation we suggest would 
work a similar benefit in this country. 

CANCELING CHECKS. 

After paying and charging a check, banks have a custom of canceling 
them by punching or making some eccentric cut through their face. 

The old style of driving a punch through a pile of paid checks, to 
signify that they had done their work, is not a style which can be 
recommended. When the Book-keeper puts daylight through his 
day's checks in this radical manner, he inflicts a disfigurement upon 
the checks which may be a source of danger. He thus hacks a piece 
out of every check, which piece, though it may bear a date or a figure 
of the first importance, goes into the waste-basket, and can be seen no 
more. I have known of aggravating cuts from checks that have thus 
made mutilations which have bothered banks in law-suits, etc. 

An eccentric cut, which removes no portion of the check, is the 
most proper cancellation, and the one now most in use in our large 
banks. 

All paid checks should be spindled, or in some way cancelled by 
Tellers, before they pass to Book-keepers to be charged and to receive 
their final and more thorough cancellation. 

Failure to remember the necessity for Tellers' cancellations has, in 



A CHAPTER OX CHECKS. 255 

at least one case, given a defaulting Book-keeper a clear chance to use 
paid checks a second time. 

I have been shown by a bank President, who has an excellent head 
for arranging bank machinery, the arrangement in his bank for can- 
celling paid and charged checks. 

His Paying-Teller is supplied with a neat little hand punch, with 
which he cuts, from each paid check which passes through his depart- 
ment, a cancelling mark, which cut is distinguishable from that made 
by any fellow-officer, since it is his own initial. The Receiving-Teller 
and the Book-keeper in this bank have each also, their separate initial 
punches ; and the use of these little hand-clippers prevents the objec- 
tionable mutilation of checks of which I have spoken, since, in using 
them, the officers look to see where they cut. 

In matters of this sort there is a right way and a wrong way to do 
things, and. though the work may seem of a very trifling character, it 
often ceases to be of trifling importance in its results. 

A final point as to cancellation is of value, for the reason that bank 
Tellers and Book-keepers sometimes cancel checks by mistake. They 
will, by error, put their punch or cutter through them when they have 
not been paid and are not to be paid by them for the reason that they 
are drawn upon some other bank. The cancelling is generally con- 
sidered an evidence of payment or a proof that a check has reached 
the end of its route. It is, therefore, the plain duty of any bank which 
has punched a check wrongfully to make at once, before it has been 
passed along to the bank upon which it was drawn, a formal record 
upon the check, and directly under the punch, that the punching has 
been done by mistake. This record should be made by the officer who 
has made the cancellation. 

Whenever a check reaches a bank upon which it has been drawn 
with a punch or cut in it that has been made, as I have described, by 
error, and yet has no certification upon it of who has made the error, 
it is the custom and duty of the bank upon which it is drawn and 
which is about paying it to send it back to the bank or party from 
whom it has been received in the process of collection, with a demand 
that the cancellation error shall be guaranteed or duly certified as 
having been made by mistake. 

The question very naturally arises here whether or not a bank upon 
which a check is drawn would be justified in refusing to pay it if it 
came to it mutilated in the manner described, provided it could not 
secure from any previous holder the guarantee or certification men- 
tioned. We reply that, if the check and its presentation were all 
right in other respects, no bank could be justified in flatly refusing to 
pay it simply on the ground that it had a cut or a hole in it. 



256 PRACTICAL BANKING. 



CHAPTER XVI. 

NOTES AND DRAFTS. 

A promissory note is a documentary promise to pay. An old 
English definition of this instrument states it to be a writing which 
contains a promise of the payment of money or the delivery of property 
to another at, or before, a time specified, in consideration of value 
received by the promisor. From a practical banking stand-point 
exceptions would be taken to one feature of this definition — that 
which speaks of the payment "on or before, " since the holder of a 
time note cannot legally be obliged to accept payment before it is due. 
This question seldom comes up between payer and payee, yet it is 
well to understand its bearings in case it should arise. A common 
style of promissory note (see Form 66), which must, of course, vary in 
form according to circumstances, is the following : 



yZj^j/ ^ PJcvujJ. dtlcuuLcxhju 






::%3p a~f^ifr ^i r ^cu^ff^ 



Form 66. 
In explaining its leading features, their bearings, and the rights 
and duties of the parties, the order of the statements set forth in the 
note offers a good arrangement for the order of our explanations. 

THE PLACE WHERE A NOTE IS DATED. 

This is of far less importance than is generally supposed. A note 
is always payable where the promisor has a legal place of business, 
unless it is otherwise specified in the body of the note, no matter 
where it may be dated. Thus, a promise to pay $5,000, dated in New 
York, and signed by a man who is a merchant in Boston, is payable in 
Boston, unless the body of the paper contains some provision of a con- 
trary character, though the word Boston may not appear on the note. 

Notes that pass from hand to hand and through banks for collection 
or discount, bearing specific places of date but no specific places of 



NOTES AND DRAFTS. 25T 

payment, are generally supposed to be signed, and so payable, in the 
places where the promisors do business. Quite often they are not thus 
executed, and risks and misunderstandings occur from a want of a, 
clear knowledge of the facts we have just explained. 

Notes should always be written in their body payable at some 
definite place. In such a case the place where they are dated appears; 
to be what it really is — of little account. 

THE BATE OF A NOTE. 

The date of a note is, of course, a matter of the first importance,, 
or it is likely to be so, for the time of maturity usually runs from it v 
and interest, where interest accrues, is generally calculated from it. 
But it is a much better plan to draw up notes and time drafts payable 
at a certain fixed time in an unmistakable way in the body of the 
documents, instead of making them payable in so many months or 
so many days from date. 

Thus, I would insert the maturing date directly in the body of the 
note in this way : ' ' For value received, I promise to pay on the 6th 
day of March," etc. — drawing the paper, in matter of date and other 
points, as in the form presented above. 

If one desired to state it still more exactly he would say, "on the 
9th day of March, fixed " or " without grace. " 

Promisors and payees of notes and acceptances are quite sure to 
know when they wish the paper they have in hand to fall due, and: 
there can be no prettier way of making the maturity clear and promi- 
nent than by setting it down at the start in plain black and white. 

The term "fixed," as sometimes used in this note form, is an unmis- 
takable one in both law and custom. Fixed means just what it says — 
positively at that time without any grace. 

These suggested forms would save trouble in computing maturities 
of paper, which, under the common form of making up time paper, is 
a ready source of error to inexpert reckoners. 

There are several leading facts relative to the dates of notes-of-hand 
which should here be stated. It is safe to say that a note made and 
issued on Sunday is an illegal document, and is therefore void. In. 
practical banking, notes are discounted and collected without thought 
of, or reference to, the possibilities of the fact that the paper may have 
about it such a taint ; but every banker ought to understand that there 
might arise, under some circumstances, what may be termed "Sunday 
difficulties " about notes. A note may be dated on Sunday and not be: 
open to any objection on that account. In averaging payments and 
issuing promises to pay of various dates, based upon the result of 
averaging operations, dates of paper are often thrown into Sunday, 
and such a location of a date of a promissory note is not ' ' illegal or 
irregular." Sunday is, of course, a regular working day, as far as 
maturity of paper and interest are concerned, yet careful calculators 
are often found studying up plans for avoiding throwing their maturi- 



258 PRACTICAL BANKING. 

ties on a Sunday, since by such they lose a day, as the Sunday note 
must, by the statutes of many States, be paid the day before. 

Notes are sometimes unintentionally issued without a date. In case 
■of the decease of a party who has given a note in this way, the holder 
may prove the date and insert it himself. In case the signer still lives, 
it is better to hunt him up and get him to put in the figures himself. 

Notes whose dates have been altered are often turning up in banks 
and elsewhere. If the alterations have been made at the right time 
and by the right person they are not legally viewed as blemishes. 

FACTS RELATING TO FIGURES. 

The figures representing the amount for which the note is given are 
almost always placed where they are shown in the form. The amount 
in a promissory note can, in this country, be legally and regularly 
given in figures, writing or cipher, but there are countries where the 
statutes demand of a not e-of -hand that its amount shall be expressed 
both in writing and figures. 

Our present common note-of-hand form is of very ancient origin. 
All its points are fully described and discussed in old French law 
books. The oldest French legal authorities take the ground, which is 
held with us to-day, that where the amount of a note is expressed in 
figures and writing, and there is a variation between the two, the 
writing shall take precedence. 

The practical view of such variations, and the action taken under 
them by the Discount or Collection Clerk of the bank of the period, 
is for either of them, when he finds a note of this incoherent character 
working its way into the files, to stop it immediately and send in 
search of some reliable parties to it who can tell for just what amount 
it should have been drawn. 

Bank officers treat checks which do not agree in writing and 
figures just as they treat these variable notes — refuse to have anything 
to do with them, until corrected, if they can by any means find parties 
to them who are able to make them straight. , 

FOR VALUE RECEIVED. 

This ambiguous opening phrase, inserted in all negotiable notes, 
and meaning nothing, since it does not state who has received the 
value, is one of those Continental red-tape forms, allied to the senseless 
use of seals and antique expressions in Law Latin with which many of 
our modern business and finance papers are encumbered. It may be 
well enough to keep up its use, since it looks well in a, note and adds 
to its dignified and formal air; but it should be clearly understood 
that its presence in a promissory note is by no means a legal necessity ; 
nor is it there by the command of a custom which has any binding 
power. An honest promise to pay will go alone without the addition 
or prefix of any such acknowledgment, and can be enforced as well 
without it as with it. In these days of rafts of accommodation paper 
it is a fact that many good notes are signed where no value has been 



NOTES AND DRAFTS. 259 

received; and, as all classes of paper adopt the fashion of using the 
words in question, it follows that, in many cases, they are mere fiction. 

PROMISE TO PAY. 

It is not easy to misunderstand the force and meaning of this 
expression. In the negotiable note the promise to pay must be uncon- 
ditional. It cannot be made to depend upon any contingency whatever. 
For the note or acceptance is deemed a negotiable instrument only 
when it is so framed that it can be transferred either for collection or 
by sale or discount from one holder to another — when it is made in due 
form for circulation as a collectible voucher in any hands to which it 
may be regularly passed. To possess all these characteristics it must 
be made payable, and that unconditionally, in money. If a note is 
written payable in cash, or particularly named articles of merchandise, 
as, for instance, in "good merchantable timber, at market price," it 
becomes a contract, and is not entitled to the name of commercial, 
negotiable paper. 

For a condensed abstract definition of the leading features of 
negotiable paper there is nothing better existing than that given by 
Daniels when he says (Vol. I. , page 56) that in order to possess the 
quality of negotiability the paper should afford upon its face every 
element necessary to fix its value. It is because paper, to be negotiable, 
must possess this important characteristic, that it becomes a question 
whether notes and acceptances written "payable in New York 
exchange," or any other exchange, can be construed to be really and 
properly negotiable. For this reason there are intelligent bank 
managers who take the stand that they will not discount such paper. 

TO THE ORDER OF. 

This expression is also absolutely necessary to a note's negotiability. 
The payee — the party to whose order it is payable, and who becomes 
its endorser when negotiated — cannot be legally called upon to meet 
the note himself until a formal and positive demand upon the signer 
of the promise to pay has failed to secure a redemption of the promise. 
Such demand, accompanied by due notice to the endorser, makes what 
the banks and notaries term their "protest" of a note — an operation 
usually costing the bank in notarial fees from $1. 50 to $2 on each note. 

Here are a few leading points about protesting which are worthy 
of being noted. Demanding and notifying, constituting what is 
termed protesting, is best done by a sworn Notary Public, whose 
broad seal-signature and formal documents are accepted in Court as 
prima facie evidence of the facts stated. When the services of a 
Notary cannot be obtained to do work of this character it can be 
placed in the hands of any person. Such unofficial protestor must be 
very careful about all his acts and records, and must be ready, in case 
his doings are called into Court or questioned in any important way, 
to furnish witnesses who can confirm his acts by their testimony. 

In all protesting, due diligence must be used in making a demand 



260 PRACTICAL BANKING. 

upon the promisor at his place of business, if he has one, or at his 
residence, if he has no place of business, or at the point where he has 
made the note payable. Where a promisor makes his note payable at 
a bank or any other specific point the demand must be made there 
and not at his residence or place of business, though these last may be 
in the immediate vicinity. This demand must be made on the day of 
the maturity of the dishonored note, during the business hours of the 
promisor, or of the office where the note is payable. 

Notices to endorser or endorsers must be sent at once ; if " out of 
town " must be mailed as soon as the day following the demand. 

Where a note bears many endorsements, all are mailed to the last 
one, and he in turn mails to those above him, a day being given for 
each re-mailing. It is perfectly legal and regular for a Notary in 
Boston, protesting a note due there, with many endorsements, the last 
one of whom is a New York party, and all the rest well-known Boston 
business men, to mail all the notices to the last endorser in New York, 
who must in his turn mail back to the one above him in Boston. 

These are only a few leading points about protesting an endorsed 
note. Manuals devoted to the business are in all good bank libraries. 

DOLLARS. 

The promissory note before us is payable in " dollars." What are 
they, from the stand-point of the American banker and merchant? 

The Bland Act made eighty-five cents or so an American dollar, 
such as is set forth in the promissory note we have in hand ; and this 
Bland Act, under which we have nominally assumed specie payment, 
upsets any theory that the country has resumed that specie payment 
which in war times we suspended. We have assumed payment in silver, 
but not resumed specie payments after the old-time understanding. 
Thus the matter is understood and reckoned upon in the settlement of 
the exchanges of the world's commerce. 

Resumption of specie payment has always meant, the financial 
world over, resumption of the payment of gold instead of paper — gold 
where any amount is concerned, and silver, etc., in change; and this is 
what resumption really means to-day. Practically most notes are paid 
by checks, certified and otherwise, which are the representatives of the 
dollar's we have been describing. 

The man who owes a note payable in dollars may pay it in various 
ways, but these all amount to about the same thing, viewed from the 
debtor's point of view. If the note lies lodged in a National bank for 
collection, the promisor thereof has a right to pay it in National bank 
bills, for every National bank is obliged to receive, in payment of debts 
due it, bills of any National bank. In times when National bank-notes, 
particularly small ones, have been in over-supply among the banks, 
they have sometimes attempted to make the point that the payment of 
collection notes — notes left in their hands by owning depositors — was 
not the payment of a debt due the bank, and that, consequently, they 



NOTES AND DRAFTS. 



261 



were not obliged to receive other than lawful money in settlement of 
such collections. But the point is a strained one and cannot be main- 
tained. Promisors have the right to pay their "dollars" in lawful 
money, no matter whether the promises to pay are in the hands of 
banks or individuals. Legal-tenders, United States notes, gold and 
silver, with qualifications, are lawful money. Here is a concise table 
of lawful money (see Form 67) : 



GOLD. 



Denominations. 



Double Eagle. . 

Eagle 

Half Eagle 

Three Dollars. . 
Quarter Eagle. 
Dollars 



Weight, 
Grains. 



516. 
258. 
129. 

77.4 
64.5 
25.8 



Amount for 

which a 
Legal-Tender. 



Gold coin of 
all denomina- 
tions is a legal- 
tender for any 
amount. 





MINOR 


. 


Five cents 


77.16 


Twenty-five cts 


Three cents 


30. 


Twenty-five cts 


Two cents 


96. 


Twenty-five cts 


Cents 


48. 


Twenty-five cts 



SILVER, 



Denominations. 


Weight, 
Grains. 


Standard Dollars 


412.5 


Trade Dollars.. . . 


420. 


Dollars 


412.5 


Half Dollars 


192.9 


Quarter Dollars. 


96.45 


Twenty cents.... 


77.16 


Dimes 


38.58 


Half- dimes 


19.29 


Three cents 


11.52 



Amount for 

which a 
Legal-Tender. 

"Unlimited. 
Not legal-t'der 
Unlimited. 
Ten dollars. 
Ten dollars. 
Five dollars. 
Ten dollars. 
Five dollars. 
Five dollars. 



Mutilated Silver and Minor Coins are 
refused, as there is no provision for their 
redemption. 



Form 67. 

It is important to note here that this standard silver coin, the 
standard "dollar," which is often sarcastically termed by financiers the 
"buzzard " dollar, is inferior in intrinsic value to a trade dollar, which 
cannot be forced upon a payee in settlement of a note payable in dollars. 

PAYABLE AT. 

The place where a note is payable is one of its most important 
features. All parties to a note are greatly convenienced by its having 
a place of payment clearly and specifically named in its body. The 
best way is, if possible, to make a bank that place of payment ; for a 
bank is a central locality for settlements of this sort, is always ready 
during banking hours for the work of receiving payment, and has the 
machinery and understands the methods required for the business. It 
is not a good practice for a merchant to make his notes payable at his 
own store or counting-room. He is likely to embarrass himself by so 
doing ; for, in case he fails to find where his note is held at the time of 
its maturity — receives no notice from the bank or individual of its place 
of deposit for collection — he will be obliged to draw his money from the 
bank and hold it in hand during all the business hours of the day of its 
maturity. On the other hand, if he has made his paper payable at his 
bank, he has nothing to do but to put his bank in funds to meet it and 
order them to do so, for no one holding it can protest it until it has there 
been presented and turned away dishonored. 

In Clearing-House cities it is particularly advantageous for banks 
and note-makers that every note shall be made payable at a bank, 
since in such cases they can be smoothly and conveniently charged in 



262 



PRACTICAL BANKING. 



through the Clearing-House at the morning settlements after the 
common bank check style. The note made payable at a bank is ordin- 
arily notified there ; yet, if the maker of a note thus drawn wishes to 
be notified personally, he has only to minute a request of this sort in 
the margin of his note when he executes it. 

THE SIGNATURE OF A NOTE. 

It is exceedingly desirable that this shall be so expressed that it can 
be readily distinguished. There is no banker of experience who will 
not be able to recall with regret the weary waste of time that he and 
his officers have been caused by the almost undecipherable signatures 
that frequently turn up in banks. There are few parties who are 
called upon to sign notes who cannot, if they so please, affix their 
names in a readable style. They may not have a talent for elegant 
penmanship, but, if they aim at legibility when they undertake to 
write, they can generally make characters which can quickly be trans- 
lated by the Discount or Collection Clerk. The signature may be 
made with a pen, a pencil, or, in fact, with anything which will write, 
and, of course, a writing fluid of any hue or material. A note can be 
signed by mark, properly witnessed, or a man's initials for his promise 
will surely bind him. A note may even not be signed at all, or may 
have been signed with an ink that has afterwards entirely fled, yet the 
demand upon it shall be good against the party really owing upon the 
note. Writing is, after all, merely a convenient witness, as it were, 
and the debtor who expects to escape from meeting his just debts 
simply because that witness may happen to be absent, in case of a 
note, for instance, will find that other testimony may be summoned 
to hold him to his promise. 

Where a man wrote a note in liquidation of a claim, and with 
fraudulent intent inserted a "not" after the word "promise" in the 
note he signed — literally promised not to pay — the swindle, of course, 
availed him nothing. 

DRAFTS AND ACCEPTANCES. 

The form below (see Form 68) of an accepted draft may serve as a 
text for considering points relative to both drafts and acceptances. 



*4& 




Z-M?£z&r. 




zz ywo 



.@L 



i-?^<Z&LA^i 






Form 68. 

In the matters of date, signatures, amount in figures and writing and 



NOTES AND DRAFTS. 263 

endorsements, the draft and acceptance are under check and prom- 
issory note laws already referred to. 

The method of stating the maturity, also, may be similar to that I 
have recommended for notes, and in the draft shown above would, 
read ' ' Sept. 9th after date pay to. " 

There are a few points of a distinctive character relative to papers 
of this description which may not be understood by all. Both before 
and after the acceptance of a draft the drawee stands, practically, in 
the same relation to it as an endorser. This answers the question so 
often raised by bank officers, ' * Why protest this draft, since it has no 
one to hold but the drawer ?" To legally bind the drawer of an 
unaccepted draft care must be used in its presentation for acceptance^ 
and protest demand and notices served. Drawees have twenty-four 
hours in which to decide whether or not they will accept a time draft. 
But when, say at the second date of this twenty-four hours, they do? 
accept, their acceptance should be dated — if the form of the draft- 
calls for an acceptance date — from the date of its presentation— that 
is, back to the time when they first saw it. 

When a draft requiring acceptance meets with a prompt and 
decided refusal of acceptance on its presentation, bank officers often 
ask the Cashier whether or not it is best to hold the paper in hand the 
twenty-four hours or give it once to a notary for immediate protest. 

This matter has two aspects. To protest at once, where the refusal 
has been flat, gives all the parties to the draft, back of the drawee^ 
the advantage of the earliest possible notice of its dishonor, art 
advantage, in some instances, of considerable value. This might be 
particularly the case where the draft was for a large amount and 
based on perishable goods which the consignee was refusing and 
which the drawer would wish to take in hand at the earliest moment. 
On the other hand there are many instances where drawees who have 
refused point blank to accept a draft, change their minds, under 
influence of circumstances, before the twenty-four hours are up, and 
finally accept — accept to growl over a protest and perhaps to refuse ta 
pay it altogether. 

The decision in the situation in question must be left to be decided 
by the bank officer by circumstances and the exercise of good judgment. 

A simple protest for non-acceptance of a time draft will permit of 
its safe return to the owners. There is no positive legal need that it 
shall also be protested for non-payment, though it is generally a safe 
custom so to do. 

A full protest — the filling up of accompanying notarial blanks — is 
always preferable in case the simple protest for non-acceptance is made 
the final protest. 



264 PRACTICAL BANKING, 



CHAPTER XVII. 

THE PRESIDENT AND DIRECTORS. 

Under this title we shall consider the administrative force of the 
bank, and very properly begin with their election. 

Early in January the Cashiers of most National banks will find that 
they have on their hands the business of attending to the manage- 
ment of the annual meeting of their shareholders. At these meetings 
the President of the bank presides over such of the shareholders as 
can be drummed into attendance, and the Cashier serves as clerk. 
^Every shareholder is entitled to one vote on each share held by him. 
[Shareholders may vote by proxies, but no officer of a bank can act as 
a proxy. No shareholder whose liability on his shares is past due and 
unpaid can vote on them. As soon as the shareholders have chosen 
the Board of Directors the Cashier should at once formally notify 
them of their election by a notice either on a postal or full-size note 
like the following (see Form 69) : 



THE FIRST NATIONAL BANK. 

Si r: New York Wjuoi^o^u. Q ...lSPO. 

At a meeting of the Stockholders of this Bank, held at their Banking 
ftooms this day, you were elected a Director for the year ensuing. 

You are requested to attend a special meeting cf the Directors this 

day at (Djuul o'clock. S\ JA. for the purpose of organizing 

the Board. p er or & erj «^LuuJL SXc^JJU, Cashier. 



Form 69. 

It will be observed that this notification also summons the Director- 
select to a meeting of the Board at a later hour of the same day for 
purposes of organization. At this meeting the Directors take the oath 
of office, a Notary Public being present to administer and record this 
oath because he can do the work in the most formal manner and attest 
with his imposing seal. The Bank Act does not specify the manner 
of administering this oath to Directors, and a Justice of the Peace has, 
therefore, full qualifications for the work. 

Here is the form of oath (see Form 70) required by the National 
.Dank Act, and it will be seen to be quite severe in its declarations. 



THE PRESIDENT AND DIRECTORS. 265 

It is required that every Director, when elected, shall at once take the 
following oath. 



' ' T t the undersigned, Director of The , of , of the State of , 

do solemnly swear that I am a citizen of the United States and resident of 
the State of , and that I will, so far as the duty devolves on me, 

diligently and honestly administer the affairs of said Bank; and that I 
will not knowingly violate, or willingly permit to be violated, any of the 
provisions of the Revised Statutes of the United States under which this 
Bank has been organized ; and that I am the bona fide owner, in my own 
right, of the number of shares of stock subscribed by me or standing in my 
name on the books of the said Bank, and required by said Revised Statutes ; 
and that the same is not hypothecated or in any way pledged as security 
for any loan or debt. 

Subscribed and sworn to this day of , 189 , before the undersigned, 
a of said county. 



Form 70. 

Not long ago I had some little conversation with an able merchant, 
who had for many years been a Director in a State bank which had 
re-organized under the National system. At this re-organization he 
declined to continue on the Board, because he was not willing to 
take the required oath. Many who are less sensitive about assuming 
such obligations are often quite easy in their way of living up to them. 
They lightly sign and lightly break their oaths of office. 

The statement in the oath as to ownership of stock, refers to the 
requirement of the National Bank Act that a Director shall be the 
owner of ten shares of the bank's stock. I note here that those National 
banks which have a par value of $50, as far as I have observed, require 
their Directors to hold, for a qualif ying quota of stock, 20 shares instead 
of 10, although there seems to be nothing in the Bank Act requring 
that they should hold more or less than 10 shares, no matter what the 
par may be. In this matter the Bank Act seems not sufficiently clear. 

The Cashier must see to it that the oaths of the Directors are at 
once forwarded to the Comptroller. The Directors are not qualified 
to serve until they have been sworn in. If they are not present at 
the first regular meeting after their election it is customary for the 
Cashier to send his Notary, with a prepared oath form, to search for 
them at their places of business, so that the oaths of the full Board 
may be sent to the Comptroller at once. 

Every National bank is required to have not less than five Directors. 
In the other direction there is no limit to the number of Directors a 
bank may have. 

The Board, at its first meeting, chooses one of its number as Presi- 
dent and, in some cases, another member as Vice-President. 

RESPONSIBILITIES AND DUTIES. 
No man is obliged to be a bank Director; but when a man has 
assumed such a position he is under absolute obligations to attend to 



266 PRACTICAL BANKING. 

its duties. He should endeavor to attend promptly all the Board 
meetings, should try to make himself famihar with all the ways of 
the institution in his charge, and should take a close personal interest 
in its officers and their methods of discharging their duties. 

In the central and all important duty of looking after the invest- 
ments of the bank, he should never forget that the loan in his charge 
is not the loan of funds belonging to the Board of Directors, but the 
property of wards in his charge — wards who are often helpless widows 
and orphans ; and he should never favor a loan or a discount which he 
would not make were he individually the owner of the entire bank. 

Without doubt there are instances where parties accept, or even 
seek, positions as Directors for the simple purpose of adding to their 
own personal revenues by the use of the facilities afforded by such 
positions for making money in various ways. Such instances are, 
however, rather exceptional. To meet such abuses Vermont has 
recently passed a law which is a good example for other States to 
follow, and the leading features of which might well be copied into the 
National Bank Act. The law in question prohibits, under severe 
penalty, any bank Trustee, Director, or, in fact, any bank employee, 
from receiving any bonus, commission, or any consideration whatever, 
from borrowers of the institution with which they are connected. 

The great majority of the members of these Boards are men of 
the highest business character who have achieved success in finance 
or manufactures, or some other leading line of business, and who 
accept the positions because they are pleased with the nature of the 
legitimate duties and associations belonging to them, and are more 
than willing to take a Director's responsibility in consideration of the 
honorable nature of the position and the opportunities afforded for 
doing business service. 

In all matters that have to do with the policy and administration 
of their bank, it is extremely desirable that the Board of Directors 
should be a unit — a harmonious body working together, as one man, 
towards a single end, and that end the best interests and highest 
prosperity of the bank which is in their charge. 

Points relative to the business of the bank should be fully discussed 
at Directors' meetings, and there finally settled. At these meetings all 
varying views should be presented. Then and there is the time and 
place for the expression of opinion and criticism. And after a con- 
clusion there has been fairly reached, that decision, as far as practicable, 
should be accepted and loyally supported by every member of the 
Board. 

But it should be remarked in this connection, that it can never be 
expected that each individual member of any given Board of Bank 
Direction shall have equal influence and power in the matter of the 
direction of the affairs of their bank. It will always, or nearly always, 
be found that the practical working of the Board of Direction business 



THE PRESIDENT AND DIRECTORS. 267 

is about like this : There will be some men on the Board who are so 
absorbed by their own private business matters that they have neither 
the time nor the inclination to give any very great attention to the 
affairs of their bank. Such Directors are inevitably irregular in their 
attendance at Directors' meetings, and, as a consequence, cannot be 
very closely acquainted with the run of matters at the bank. They 
may be faithful and able business men, but they have entered the 
Board of Directors with the tacit understanding that the Board is to 
have only a small share of their business talent. 

Then outside of this general distinction as to some of the members 
of Boards of Direction, there is that difference of power and influence 
exerted by individual Directors which comes from existing differences 
in the make-up of the men as regards their force, persistence and 
ability. It is not far out of the way to say that the practical workings 
of the average Board of Bank Directors are much after this sort. 
When first thrown together the various members may be little 
acquainted with each other's business habits, talents and tastes. 
They may, for a time, drift along in rather a promiscuous manner, 
but before long it is apt to be the case that the discovery is made that 
one of their number is by nature, education, real business talent and 
force of character well calculated to be the leading man among them, 
and not at all unwilling to be recognized as such. It is rare to find a 
Board of Bank Directors which does not contain at least one member 
who is recognized, inside and outside the bank, as the leading spirit of 

the Board. 

FINANCE COMMITTEES. 

Boards of Directors are in the habit of delegating a large part of 
their management to a Finance Committee made up of three or four 
of the most active members of the Board, with the President of the 
Board as Chairman ex-officio. Unquestionably a majority of banks are 
"run" by their Finance Committees. The by-laws of these institu- 
tions usually fully define the powers of the Finance Committee, and 
from time to time, by vote, special duties are thrown upon them — 
such, perhaps, as the purchase or sale of a quantity of stock or bonds 
when all the information necessary could not be procured for the full 
Board and yet where the President did not want to take the sole 
responsibility of a decision. This important committee is a very con- 
venient and important "institution" in every systematically managed 

bank. 

MEETINGS AND RECORDS. 

The by-laws of a bank state when these meetings shall be held, 
what number of Directors shall make a quorum at meetings, etc. , etc. 

As regards time of meetings, the banks vary widely. The range is 
all the way from the once-a-month of the small bank in the country, 
with a Board made up of gentlemen living in many towns in the dis- 
trict where the bank is located, to the daily meetings of the Board of 



268 PRACTICAL BANKING. 

some great city bank, whose capital, deposits, etc., are heavy, and 
whose business has a wide sweep. 

The hours of meetings also, vary just as widely ; for, while the bank 
in the city or large town generally calls together its Directors at some 
hour between 10 o'clock A. M. and 2 or 3 o'clock P. M , it is not 
uncommon for a bank in the back country to hold its Directors' 
meetings in the afternoon or evening hours. 

The general routine of these Directors' meetings is of this sort : 

The President, if present, takes the chair ; if the President is absent 
some Director — generally the senior present, where there is no Vice- 
President — assumes his place. The records of the last meeting are 
read. Then a statement of the present condition of the bank is pre- 
sented. After this comes a consideration of applications for loans, 
renewals, and. of any business matters relative to the bank which may 
be pressing for attention. 

These general business matters are of a great variety of character. 
Tfew officers may be needed, and their selection must be attended to. 
Salaries may need revising. Vacations may need consideration. Law- 
suits hanging over the bank may have to be talked over. The aspect 
of suspended and wavering debts to the bank may have to be discussed. 

After the formal business of the Board, comes generally a very 
informal and semi-social talk over matters which sometimes have a 
business bearing and sometimes have not. 

The records of these Directors' meetings are usually made by the 
Cashier ; sometimes by one of the Board acting as clerk of their number. 

The transactions should be neatly and concisely entered in a suit- 
able book, specially prepared for the purpose. I know of no better 
forin of making this record than this (see Form 71) : 

THE TENTH NATIONAL BANK. 

MEETING OF THE DIRECTORS. 

MONDAY ^^a^o^u 1 C- 18QO. 

OA-jO^juj^aa. tX_.AA^a. X.XxJhj^*.h-XL-^ 

^ju6^lxjljijlj^Xji_A, xoo^ jLjlA-A^c»_aa^oJL jkJLxLJi>Ov_>jtxL, cp "[ O , O O O 

^H~. jLfi_XX>X-fl_; JjJL oJLajLA^>C_J>_) ^^(X-Jojt-fl-A XjGl. Jir\r\ a, > \<=><X_^i\_jk_fl_A_, -Iaxa. 
JLK-A_Q-fl_> JkA^X»^«jCtK.yfcL, JL&-A. CX. ^9oCLAL<X_a_fl_> XjCx. CPJLOv_X>jLfl_ 

Gjtbu6Jt : W. RICE, Cashier. 

Form 71. 



THE PRESIDENT AND DIRECTORS. 269 

For fear some junior clerk may think that my illustrative vote 
should have had a broader bearing, I will quote one that may suit him 
better which I recently noticed on the record of a large city bank 
under date of a little over thirty years ago : ' ' Voted, that the bank be 
closed on Thursday next in consequence of the great Exhibition of 
Horses and other Animals to take place on that day.'''' 

There is no need of entering upon this record book anything but 
the merest facts of the discounting, since all the details relative to 
those transactions will be found in their proper place in the other 
books of the bank. 

Officers taking vacations (and all bank officers should take vacations) 
should send in to the Board meetings their applications for the same, 
stating proposed length of absence ; and all such applications should 
be acted upon by the Board. It is very desirable that this matter 
should be attended to in this formal way, since, under such an arrange- 
ment, the bank knows just where its officers are, and fellow-clerks 
know when they are to be absent and when they are expected to 
return. 

A majority of any Board of Directors usually constitutes a quorum 
for the transaction of general business ; any number present a quorum 
for discounting, since all discounting is, sooner or later, pretty sure to 
pass under the inspection of all the members of the Board, and to be 
reversed and annulled — the paper somehow got rid of if possible — if 
any member of the Board is dissatisfied with it. 

This matter of properly writing up its Board records is a legal 
obligation upon every National bank ; and, when the bank Examiner 
comes around, he will, if he does his duty, look about and see if this 
work is rightly done. 

DIRECTORS IN THEIR RELATIONS TO THEIR OFFICERS. 
I have just said that a man should never accept the position of bank 
Director unless he is willing to accept all its responsibilities and attend 
to all its duties ; and among a Director's highest duties and responsi- 
bilities I place those which have to do with his official relations to the 
bank's employees. The Directors have a right to demand of the officers 
prompt, efficient and most honest service. On the other hand, the 
officers have a right to expect that their Directors, who stand to them in 
the immediate light of employers, should take not only an employer's but 
a sort of parental, interest in them. They should endeavor to acquaint 
themselves somewhat with the out-of-bank habits, surroundings and 
general way of life of their employees. They should be ready to 
sympathize with them in those troubles which come to all, sooner or 
later, in those pleasures and successes of which they have a share, and 
should also extend to them as far as practicable, a social — a human 
recognition. They should try to become acquainted with their' way of 
work in the bank, so as to be ready to encourage and commend faith- 
fulness, and to discourage and correct laxity and carelessness. It goes 



270 PRACTICAL BAILING. 

without saying that they should be ready to pay generously, promote 
constantly, and to extend to the worn and sick liberal furloughs, and 
to the hard working, well-stated vacations. 

And, in my opinion, the great majority of Boards and bank 
Directors do come well up to the point of "filling this bill." 

The bank officers who have been placed in positions of trust, honor 
and fair remuneration, by Boards of Directors, the average of which 
are of the character I have described, are guilty of extreme baseness 
and ingratitude when they violate the confidence which has been 
reposed in them ; for, in cases of defalcation and breaches of confidence, 
the public is sure to throw some odium upon the Boards of Directors 
which have been chosen to select and supervise those officers, though 
in many such cases the Directors have done all that men in their 
position could do ; for, place about a bank officer whatever guards and 
supervision you may, when once he has been put in a position of trust 
and confidence he can be a scoundrel and steal if he wishes to do so. 

RELATIONS OF DIRECTORS TO DEALERS WITH THE BANK. 

Their most important relations to customers have, of course, to do 
with the matter of making loans to them — distributing discounts. 

A bank's first duty is to extend all reasonable accommodations in 
the way of loans and discounts to its depositors, whose line of deposits 
makes up an average of gross deposits, which is one of the chief loaning 
resources of the bank. 

It is not stretching a figure to say that good depositors, when they 
borrow money of their bank, borrow their own money — in general 
terms — pay time interest upon loans of money which they have lent 
their bank on demand free of interest. 

When a bank is in funds to discount, it should first endeavor to 
meet the wants of its valuable depositors ; and, when this has been 
done, it is time enough to look about among the applications of 
outsiders. 

The position of bank Director is certain to bring to its possessor one 
notable embarrassment — he is sure to be beset by frequent requests to 
use his influence at his bank to secure loans for friends and business 
acquaintances which he cannot accede to. I need only to hint to these 
friends and business acquaintances who are pressing the bank Director 
for loans at his bank, with which they may keep no account, that every 
bank Board is made up of many men with many minds; and, that, 
however desirous our individual Director may be to tide over the cash 
wants of his friends, delicacy, duty and other very material obstacles 
may often make him powerless to do anything in the premises. 

SELECTION OF DIRECTORS. 

This chapter opens with a description of the routine of election and 
organization as it annually occurs, but there may have been some 
preliminary work rendered necessary by vacancies in the Board which 



THE PRESIDENT AND DIRECTORS. 271 

have been left unfilled until the regular time for the annual election. 

It is always somewhat difficult to find just the right material — to 
get the right class of men to fill these vacancies, or to enlarge the 
Board. 

There are easily accessible — very close at hand — plenty of unsuitable 
men, who are more than willing to attempt to fill these most 
responsible and ability-requiring positions ; but those fitted and, at the 
same time available, for these posts are scarce. In a word, business 
men, whose services as members of a Board of Direction of a bank 
would be of the most value, are generally least willing to serve there 
— the most difficult to be induced to take such posts. A deal of 
gratuitous work, unwelcome and wearing responsibility, and very little 
of what business men deem compensation, are the things which block 
the way to many a good man's acceptance of a Directorship in the 
National bank of the period. 

Then, when a new Director is to be selected and elected, it is 
particularly to be desired that he shall not only be the right man in 
point of general quahfi cations, but that he shall be specially conversant 
with trade and credits in a branch of business which is not already 
well enough represented on the Board. So that the hunt for the right 
man, with the desired experience and antecedents is often a long and 
difficult one. Particularly is this the case in our large towns and 
cities, where many active competing banks have been absorbing in 
the building of their Boards all the best material to be found in the 
various branches of trade and finance in their vicinity. In such a case 
it is often the practice to tender to Directors of promise on Boards 
of small banks positions in the same capacity in the larger banks. 
There is nothing in this custom, if manly means are adhered to, that 
is not regular and commendable. Promotions are always in order, 
as well among bank Directors as bank Messengers. 

Vacancies in a Board of Directors may be filled by the remaining 
Directors without waiting for a meeting of stockholders. In that case 
the Board talks over the matter, and, after deciding that it will be 
best to fill a vacancy, appoints a committee from their number to 
select a candidate. A suitable person being found, who is willing to 
accept the position, his name is reported to the Board, and there he is 
balloted for, and, generally, unanimously chosen. 

This power of filling its own vacancies gives to Boards a close cor- 
poration aspect which is open to some objections, but objections which 
cannot easily be remedied. 

And, in fact, in smooth-going times, in well organized banks, the 
whole matter of the selection of Directors is, in a majority of cases, 
virtually left in the hands of the Directors themselves. 

There is no written law that they shall choose their own successors, 
yet such is the custom in very many cases with the very best banks. 

When the time for the annual meeting comes around, the Board 



272 PRACTICAL BANKING. 

looks about to see whether or not there are to be any necessary changes 
in its make-up. And it then selects for the shareholders a ticket with 
such retirings and additions upon it as circumstances have dictated. 
This ticket, which is apt to be a ticket in the best interests of the 
shareholders, is, in regular course, generally unanimously elected. 

And the course I have described is not to be hastily condemned, 
since a good Board of Directors understands well the director-needs of 
the bank. 

The idea of extending compensation — even more compensation than 
a mere attendance fee — is one worthy of more consideration than it has 
so far received in this country. The worst thing about such a plan is 
the fact that, under its workings, incompetent men would worm them- 
selves into paying directorships simply for the purpose of securing 
the fees — taking positions where they are not needed for the pay 
which they need. 

This abuse — this corporation blight — is a bad feature in London 
banking. 

I have been told by London bankers that many an impecunious 
English lord would not be able to spend "the season "in London 
were it not that he had succeeded in getting positions as a titled 
dummy Director, on many Boards of bank and insurance direction. 
And I often noticed, while in London, studying financial aspects as 
revealed in London newspaper columns, the frequency with which the 
names of noblemen cropped out on the advertised lists of corporation 
Directors. 

But here is a London " Times " advertisement pointedly illustrating 
this London Boards-of -Direction humbug : 

ANTED, AS A DIRECTOR OF A JOINT-STOCK BANK, A GENTLEMAN 
of position. Qualifications nominal. Fees £500. Apply to 

SNOOKS & SNOOKS, etc., etc 

BANK PRESIDENTS. 

Under the present banking system these are of many sorts ; and it 
was just about the same under the old State banking system — a system 
with which I had a close acquaintance. 

A hasty classification of the various types of these officials can be 
made in about this manner : 

The first was made President because he was a wealthy man, 
largely interested in getting up the bank, and because he wanted the 
honor of the position. He drew no salary, did no real work, and had 
little fitness for bank management. He managed to put his rather 
cramped signature in the proper places, and his fondness for his 
name on bills, stock, etc., made him willing to endure the writing 
drudgery. His Cashier ran the bank under more or less personal 
supervision of the whole Board. 

Another was chosen President because he was the ablest and most 
prominent man on the Board. He had business enough on his hands, 



W 



THE PRESIDENT AND DIRECTORS. 27$ 

outside the bank, to kill two common men ; yet he was ambitious, and 
ready to give a share of his strength to his bank. He drew a salary 
of $6,000 from the bank, and necessarily left much of the management 
with the Cashier. As for the Board, why, he was himself, in fact,, 
pretty much the whole Board, for his colleagues were weaker men,, 
prone to let him have his own way. 

A third was made President because he had, in a civil service- 
manner, qualified himself for the position by a life-long study and 
practice of banking. He had been through every position in a bank., 
from that of Messenger upwards. He was skillful, affable, strong. 
He gave his whole soul to the management of his large bank, com- 
manding — demanding — the co-operation of his able Board of Directors. 
His capable Cashier was expected to be the executive head of the 
institution, and under him all the officers were expected to toe the line 
of duty. He was paid a salary of $10,000 a year, and fully earned it. 

Bank shareholders have it in their power to select from this list of 
types the type of a President they will have to take care of their 
property. 

The scope of a President's labors, particularly in the case of one at 
the head of a bank in a city or large town, has changed quite materially 
within the last thirty years. In some points his work and responsibility^ 
is less than formerly ; in others more arduous and pressing. Business 
is more extensive and speculation more rampant than in the old days ; 
and hence, in many respects, the average bank President of the period 
carries a heavier burden than did his predecessors of 1840 and there- 
abouts. As far as keeping up the loan of a bank in a large financiaL 
centre is concerned, there are aids at the command of the bank Presi- 
dent of the present day which the old-time bank President could not 
avail himself of — could not because they either did not exist or were 
of such small importance that their help, if summoned, amounted to 
but very little. The helps which I have particularly in mind are 
dealers and brokers in negotiable paper and the mercantile agencies. 

In very many instances in city bank management the intelligent 
and substantial private banking houses, which make a specialty of 
buying and selling business paper, run into the bank loans a very 
large percentage of the paper which is taken on. These paper-dealing 
houses make it a business, of course, to study up and keep closely 
acquainted with the means and standing of the concerns whose paper 
they negotiate, since their reputation and profits, in the long run, 
depend upon their own success and reliability in the matter of discrimi- 
nating regarding the credits they handle. 

The private banking house which has the name of being successful 
in placing uniformly good paper with the banks with which it 
deals — with which it has long dealt — has a good will as a business 
concern which is of solid money value. 

The value of our well-established mercantile agencies as helps to 



274 PRACTICAL BANKING. 

bank Managers in selecting paper for their loans, I have elsewhere 
iully discussed. 

I can easily recall the time when we had no such agencies ; I can- 
not now easily make out how we managed to get along without 
them. 

While Presidents' duties have, in some points, been lightened by 
methods and machinery which have of late years been introduced into 
the banking business and into general financing, the work of Cashiers 
has, it seems to me, been increased. 

In all that relates to what may be termed the internal administra- 
tion of a bank — the management of the details of its business as 
transacted by the officers of the bank in its various departments — 
matters were never more complicated, more far-reaching and more 
extensive than they are at present. 

There are to-day scores of banking methods, such as those of 
making call loans upon bonds, shares, etc., transferring money by 
telegraph, loaning between banks, buying and selling domestic 
exchange, etc., etc., which have sprung into existence, or, at least, 
increased tremendously within the period I have alluded to. 

BANK PRESIDENTS' ENDORSEMENTS. 
Our banks, in the conduct of their routine business, are in the 
habit of alternating the endorsements of Presidents and Cashiers as 
convenience may dictate. When the Cashier is present and has the 
time he is, of course, accustomed to endorse wherever upon checks, 
notes and drafts the endorsement of his bank is demanded. When he 
is absent from the bank, or for other reasons is not so placed as to be 
ready to give his name or that of an Assistant-Cashier, the President 
of the bank endorses as President, and in general business and among 
banks his endorsement is received as the equivalent of the Cashier's. 
J3ut the United States Treasury Department has taken the ground that 
a bank President has no ex-officio right to thus endorse for his bank — 
that he can only do so where the by-laws of the bank or a special 
resolution of the Board distinctly provide that he shall discharge 
such a duty. This is a rather singular position for the Government 
to take. There is, as we have stated, a general idea among bankers 
that a bank President may, in the absence of the Cashier, perform 
the general executive duties of a Cashier. But the Government seems 
inclined to view him as simply the head of the Board of Directors, 
with the official duty of presiding at their meetings, serving as one of 
their number, and not by virtue of his office qualified to do much else. 



SOME WORDS ON MANAGEMENT. 275 



CHAPTER XVIII. 

SOME WORDS ON MANAGEMENT. 

In the management of the details of a bank — in the general admini- 
stration of its internal affairs — the head Manager and all his subordinates 
should aim to be as helpful and accommodating to their dealers and 
general customers as the rules of good banking and the customs and 
laws of business will allow. 

Every bank officer should fully understand the bearings of all the 
banking questions that come before him for adjudication — should 
know the character of the rights and responsibilities involved in all 
the points at issue in the problems which may present themselves for 
his consideration. When he has found out just where he stands, he 
should, in all cases, endeavor to cut red tape as often as he can — to 
settle and dispose of business with as few blocks and delays on account 
of formalities and rules as possible. 

The Teller came to the Cashier with a check which some bank 
would not pay because it held that a guarantee of a certain endorse- 
ment was needed. The Teller was confident that the check was all 
right without this demanded guarantee — thought the bank upon which 
it was drawn was wrong in asking for it, and was in favor of handing 
the check at once to the Notary for protest. The Cashier, on looking 
into this guarantee point carefully, saw that the check really did not 
need any guarantee. He also saw clearly that there would not be the 
slightest risk or impropriety, for the sake of collecting a check for a 
valued correspondent and facilitating business, in conceding a point to 
the rather contentious neighbor-bank which demanded this guarantee; 
so he promptly guaranteed the endorsement, the check was at once 
collected, and nothing more ever heard from it. This was helping 
business along in a manly and sensible way. 

The Teller brought the Cashier a check which he said he could not 
collect from a neighbor-bank because they claimed its payment had been 
stopped by the drawer. The cheek had the appearance of being right 
in all points— properly endorsed and all that. The Teller suggested 
that it be protested. The Cashier divined that there must be some 
error or misunderstanding about the situation of the check when the 
parties to it ordered it stopped. Instead of returning it dishonored, he 
had his messenger hunt up the drawer, who was a well-known business 
man not far away. The drawer was found, and he readily and grate- 
fully cashed the check himself. He had hastily stopped it, thinking it 



276 PRACTICAL BANKING. 

failed to reach the right hands, when it really had only been slightly 
delayed in the mails. 

These are only a couple of simple illustrations of common sense and 
accommodating practices in every-day banking — practices which should 
be the rule in all banks. 

THE MOODS OF BUSINESS MEN. 

A gentleman, seeking an executive position of responsibility through 
an advertisement in a leading metropolitan paper, states that among 
the qualifications which he possesses is a thorough acquaintance and 
experience with the moods of business men. He has certainly intro- 
duced a very suggestive expression into his card. Treating, as we do, 
of only the banking side of business, we use the text which the 
advertiser has furnished us in its application to bank Managers and 
bank management. Few there are that have had much experience 
with banks, either as sellers of paper or borrowers of money, who 
have not discovered that the success of their negotiations is quite 
often apt to depend as much upon the moods of the men who are at 
the helm of the banks, as upon the actual monetary situation of the 
institution approached or the real claims of the applicant. 

This certainly is not as it should be. The ideal bank Manager is one 
who treats all who approach him with unvarying courtesy, and who 
never gives way to moods or is influenced by his own personal feelings. 
He moves squarely forward upon an abstract business line. He may 
feel reluctance in making a move of any sort, for some unaccountable 
reason, or he may have an unreasonable aversion to the medium 
through which applications reach him ; yet, if he is a well-disciplined 
man of business who has learned, as every truly successful financier 
has learned, that his moods are not to be trusted, he looks cheerfully 
into all reasonable proposals for loans and discounts, and makes 
advances with the proper discretion, when his institution is in a 
situation to let out funds. 

There come to all men hours of depression, times when trifles 
annoy, irritation seems almost a second nature and the drudgery of 
business something almost unendurable. Sometimes there are evident 
reasons for these moods. Illness, loss of sleep, anxiety over others 
who are in suffering, often causes the feelings described. But, 
whether the outcome of something that can be seen, or the result 
of influences so occult as to be undiscoverable, they must alike be 
kept down and suppressed, for there is no place for them in the lines 
of business. The borrowing and lending world must move on and 
keep these moods and feelings out of sight. 

DEALINGS WITH STRANGERS. 

There should be little need of emphasizing for alert and intelligent 
bankers the dangers and responsibilities arising from having bank 
transactions of any sort with strangers — with parties not known to be 



SOME WORDS ON MANAGEMENT. 277 

honest and responsible. But I have recently had my attention kindly 
called to an incident in real life in banking, in a distant State, which 
applies so directly to the subject in hand, that I cannot well pass it by. 

The bank Cashier, who was a most able manager, was sometimes 
in the habit of taking on new individual accounts in a rather indis- 
criminate manner — not holding it to be absolutely necessary to examine 
very carefully into the antecedents of any party who simply wished to 
deposit and draw and never to borrow. 

When it was hinted to him that such a method in banking had its 
peculiar dangers, since it threw an unwonted responsibility upon 
Tellers, Book-keepers, etc., who might over-pay and give money 
credits, or in some other way get entangled with depositors who 
might not be able to respond, the prompt reply was pleasantly made, 
that bank officers should not make mistakes. 

Now I think I shall be clearly understood when I say, that any 
theory or practice of banking which does not recognize mistakes as a 
part of the methods and machinery of practical banking is resting upon 
uncertain grounds. The best of bank officers must make errors ; and, 
in the administration of any bank, this fact must be discounted. 

But to the case in point with the bank which did not intend to 
recognize this liability as an element in banking. 

Brown & Robinson kept an excellent account with this bank, and 
Brown & Jones also kept an account which, however, was not up to 
that standard, and they were also strangers lately incautiously 
taken on. 

When these latter parties collapsed, the bank took little interest in 
their failure until it was found that their check-drawings upon the bank 
were upon funds that were not theirs — money that had been, by the 
mistake of a Book-keeper, credited to Brown & Jones, when it really 
belonged to Brown & Robinson. 

There is nothing novel in such a complication as this. I only men- 
tion it because it is an illustration in clear type of a common class of 
bank misadventures — a class which would be much larger than it is, if 
most experienced bank Managers were not extremely careful about 
extending depositing facilities to unindorsed parties. 

Even in the best managed banks, losses from misplaced credits must 
sometimes occur. 

I have in mind a case where a rotten and failing country bank ran 
along for months with its reserve agent in a large Clearing-House city, 
upon heavy, misplaced credits of remittances — remittances which came 
from a strong bank bearing nearly the same name, with a final loss 
thereby to the city bank of many thousand dollars. 

A DOCTOR FOR A BANK. 

The Bank of England has a regular medical attendant who is one 
of the standing officials of that institution. His duty is what his title 
indicates. He daily goes his rounds among the officers of the bank for 



278 PRACTICAL BANKING. 

the purpose of looking after their health. If an officer wishes a vaca- 
tion on account of illness the bank doctor considers it his duty to make 
a confirmatory examination. He also considers it his duty to keep a 
constant watch over the condition and surroundings of the men in his 
charge so as to see that in sanitary matters everything is as it should 
be. It would be an excellent plan if some of our banks and other large 
employers of help would adopt this medical notion. 

DEPARTMENT ACCOUNTABILITY. 

In the administration of a bank it is extremely desirable that there 
shall be, between the various departments and the central manage- 
ment, as far as the daily details of business are concerned, what may 
be termed a responsive accountability, so that at the close of a day's 
work, the Manager may know just where all the cash, checks and 
notes which have been turned over to his institution by his correspon- 
dents and home depositors have lodged — just how the various items 
have been scattered among his several departments of work. The more 
perfect the system by which just accountability is established, the more 
safety in the general conduct of the business of the bank and the 
greater the readiness with which errors may be discovered at the close 
of the day when the cash is to be settled, and the final discharge of all 
the letters by checking and acknowledgment is to be brought to a 
conclusion. With these aims in view there is no better system, as far 
as the conduct of transactions with regular home depositors is 
concerned, than that which rigidly requires that all deposits of cash 
items and collections shall be accompanied by careful invoices and 
tickets — bills of particulars. 

The letters with remittances of the usual variety that are daily 
coming into a bank should be opened by the Cashier or his special 
assistants, and then passed through the hands of the Tellers and 
Collection Clerks for the purpose of permitting them to take from the 
same the items belonging to them, and receipt by check or initials for 
the items taken. On the return of the letters to the Cashier he can 
see at a glance whether or not each letter has been fully discharged — 
all its contents duly receipted for — before he finishes its work by a final 
acknowledgment. 

EVERYTHING EXAMINED. 

One of the best rules ever established in a bank is that requiring 
that all clerical work done therein shall be examined — shall pass under 
the inspection of two pairs of eyes. This rule obtains in many of our 
largest and most systematically managed banks, is increasing in its 
adoption, and I see no reason why it should not be generally in vogue. 

In all bank work, no matter how faithful and skilful the workers, 
mistakes will be made. Every bank manager ought to remember that 
it is just impossible for the institution under him to be run along 
without such. Every bank clerk should recognize the fact that to 
make more or less errors in his writings, his cipherings, his countings, 



SOME WORDS ON MANAGEMENT. 279 1 

and his ngurings, is to be, if we may so express it, a feature of his 
business— his general way of banking life. He cannot pretend to the 
possession of supernatural powers, but has a human liability to error. 
He should, therefore, do the very best he can and then study to 
acquire a habit — a temperament that is adapted to his work and its 
large responsibilities. 

In the case of bank officers, as in the cases of many other wearing- 
positions in life, it is the worry and anxiety, the fear and the fret that 
kills, and not the real work. 

And a deal of all this mental distress and strain may be avoided by 
the establishment in the bank of a proper system of " doing things, "" 
and by the presence there of a wise, able and kind-hearted chief 
executive officer, who fully recognizes the truth of what I have said 
regarding the liability of every one in his bank, himself included, to 
make errors, and who knows enough and is enough of a Christian not 
to make himself a terror in the eyes of his subordinates. 

Some of the worst bank defalcations I have known have been 
directly traceable to the fear of mistake-making subordinates, who 
have begun their irregularities by endeavoring to hide from Presidents 
and Cashiers innocent errors. 

There is one other point that should be mentioned in this connec- 
tion, and it is this : In making these inevitable errors of which I have 
spoken, bank officers should always be prompt to acknowledge their 
own responsibility in the matter, should never, either by word or 
inference, endeavor to thrust undeserved blame upon others, or spend 
much time and talk in framing excuses for their slips. Accept the 
situation, and go ahead and do the best that can be done in the future. 

Referring to the idea with which this paragraph opened, I remark 
that the only system of bank work which will reduce the average of 
errors to the minimum is that which demands that every possible 
opportunity be taken to pass work through the hands of two officers. 

FOREVER FORGETTING. 

Cashiers, Transfer Clerks, Tellers, and others, in bank work, who 
are liable to be called upon to decide difficult points that are coming 
up from time to time relative to the rights and duties of parties to 
transfers, to notes, checks and drafts, are perfectly well aware of this 
difficulty in their business. In the first place, new points, of the 
character in question, are daily coming up. If the bank officers are 
alert, faithful and intelligent, they at once study into these new points 
— post themselves thoroughly regarding all their bearings — so as to be 
able to take intelligent action in disposing of them. It is quite likely 
to be the case, in many instances, that a very long time may elapse 
before they are again called upon to pass upon a case the situation 
and bearings of which are precisely identical with the one they have 
studied up and disposed of. 

Every bank officer, for a long time in any particularly responsible 



280 PRACTICAL BANKING. 

position, will fully apprehend, as he reads this paragraph, that we are 
quite correct in saying that one of the features of his business that 
gives hiin no little care is the fact that, from want of consecutive — 
frequent — practice in the administration of these various affairs of 
which we have spoken, he is forever forgetting and forever being 
obliged to return afresh to the study of old points in the methods of 
banking. 

Go up and down any street of banks to-day and enquire of the most 
thorough bankers there to be found how you shall proceed — how act — 
in some difficult point of bank administration, in these matters of 
details of which I am speaking, and the discovery will be made that 
it is not easy to get prompt and clear information in the premises. 
You have forgotten, and they have forgotten, all about the status of 
■the matter in question, because, may be, it is so long since the point 
has been up. 

It is for these reasons, as well as others, that every bank should be 
well equipped in the matter of library and should have a superior class 
of banking reference books. 

I have tried in these pages to put on record many points of informa- 
tion which bankers have forever been learning and forever forgetting. 

PROPER DIVISION OP LABOR. 

When practicable, where the bank is large and its business exten- 
sive, it is well to have separate officers for every department of work. 
/Safety lies in this method of administration. The different depart- 
ments, when managed entirely distinctly, and with proper system, act 
as checks upon and guards of each other. The situation under such 
methods is such that irregularities and defalcations become almost 
impossible except when two or more dishonest officers work in collusion. 
But if various kinds of bank work are to be combined under one 
department great care should be taken in making up the mixture. 
Some combinations are comparatively safe while others are exceedingly 
■dangerous. 

If a bank finds itself able to get along with one Teller — an officer 
who shall do all the paying out and receiving — such an arrange- 
ment can be made without incurring any of the risk which might 
«xist if the combination was of a different type. But it is always 
objectionable, on the grounds explained, to put the work of a Book- 
keeper and Teller in the hands of one officer. It is desirable for the 
same reasons that the discount and collection departments, which can 
if economy demand be combined together, should be kept distinct from 
and independent of the receiving and paying-out departments. 

In the largest banks, where there are systematic divisions of labor 
-under many heads, there will be changes and substitutions growing out 
•of the illness and vacations of its officers. In making the shifts 
and transfers which become imperative under such circumstances 
Managers should carefully bear in mind the necessity of avoiding, even 



SOME WORDS ON MANAGEMENT. 281 

for short periods, unsafe combinations. Officers who are transferred 
from one department to another under pressure of necessity should be 
careful to see that the work they enter upon is well arranged and in an 
honest condition when it is turned over to them. A Teller should not 
expect any officer to take charge of his cash until there has been a 
mutual examination and proper certainty that the cash is all right at 
the time of the new departure. 

THE BANKING CONVENIENCES OP TO-DAY. 

The banking interests of the country were never in more competent 
and more honest hands than at the present time. And the present 
National banking system is indisputably the best that ever existed in 
this or any other country. It is, beyond comparison, the superior of 
the old State banking system of New England and other localities, 
which in former days commanded no small share of public admiration. 

And in another direction the most astonishing advance has been 
made. And that is in the application of the various improvements 
and discoveries of modern times to what we perhaps rightly term the 
mechanism of banking. What marvellous changes have been made 
since I first entered a bank in our machinery and in our methods of 
running the same ! 

To-day, as I close my bank at two o'clock, I find I have hundreds 
of thousands of dollars in New York that should be in Boston. I hand 
my porter a short telegram, and, when I reach my desk to-morrow 
morning, I find thereon the hundreds of thousands in gold, greenbacks 
or checks, that have come humming home to me during the silent 
watches of the night, by express or mail, which have thus completed 
the work of the telegraph. 

I receive a cipher telegram from the Pacific coast, and I pay to the 
San Francisco merchant, at my counter in Boston, a balance which he 
has on deposit in the Great Western Bank, in San Francisco, and he 
goes on his way rejoicing. 

Under the deep waves of the Atlantic stretches a wire that brings 
me at any moment the last quotations for United States bonds, Consols 
and money in London, and executes money transfers for me as easily 
as I cash a Boston check. 

I wish for the very latest New York quotations of the stock market, 
and the ticker at my hand reels them off for me with automatic precision. 

I am asked to make a negotiation with the Stock Board, or with 
banks or bankers of my own city, and through the telephone goes all 
that is needed to complete the trade. 

I am honored, Mr. Publisher, by a call from you at our bank ; and, at 
a touch of a signal electric wire, running under the floor from the side 
of my desk to the bronze door of my private office, the door flies open, 
and you enter; and, when you leave me, you are "fired out" by the 
same sort of lightning. 

I grow weary of writing, or am impatient over its slowness, and the 



282 PRACTICAL BANKING. 

stenographer conies to my relief, with his complement the type-writer, 
and the hektograph man and the lithograph man are not far away, 
each ready to multiply with wonderful ease any written words. 

Vaults of the finest steel, and of the most substantial character, 
with huge doors that seem to swing on golden hinges, close upon our 
treasures, as if by magic, with combinations that are keyless, guarded 
by burglar alarms that are electric. 

So I might go on with the list of improvements that have been made 
in the field we are surveying. 

The last half of the nineteenth century has witnessed, in our line, 
progress very similar to that noted in almost every other quarter. 

Let us, who are still in the harness of business, and those who are 
so soon to be our successors, see to it that all this fine business 
machinery, which I have attempted to describe, is well manned, and 
all these complicated methods of business, which I have endeavored to 
explain, well-managed and, if possible, improved. And let every 
endeavor be made to keep high the general tone of business of the 
times in which we live and work. 

ECONOMIZING TIME. 
Mr. Gilbart writes so well on this point that I must quote from him : 
"A banker should know how to economize his own time. One mode 
of doing this will be, as we have intimated, to assign inferior duties to 
others. His accountant should keep his books and make his calcula- 
tions. His secretary should write his letters (except those of a private 
or confidential nature), and he should only sign them. His chief clerk 
should attend to the discipline of the office. 

A banker at the head of a large establishment should not only be 
acquainted with the art of banking, but he should also be acquainted 
with the art of government. He ought to put a clever man at the head 
of each department, and reserve to himself only the duty of general 
superintendence. He should give these parties a pretty wide discre- 
tion, and not encourage them to ask his instructions about matters of 
comparatively trifling importance. If he does this they will never 
learn to think for themselves — never feel that wholesome anxiety 
which results from a sense of responsibility and never acquire that 
decision of mind which arises from the necessity of forming an inde- 
pendent judgment. Consequently they will be less useful to him in 
their present position, and never become qualified for higher offices." 

INCIDENTAL EXPENSES. 

The incidental expenses of banking sometimes run away with the 
profits of the business. This became a very apparent fact during an 
era not long past when it was the general fashion to build extrava- 
gant banking buildings and to fit up banking rooms, which should 
always be plain and solid in their leading features, in the most showy 
and ornate stvle. There is ever a tendency among employees, of 



SOME WORDS ON MANAGEMENT. 283 

corporations at least, towards carelessness, if not extravagance, in 
incidental expenditure. In bank management there is special need of 
watchfulness against this drift. There is something rich in the sound 
of the word "bank " to the ears of the traders who cater to the various 
incidental wants of the bank, and it has become a matter of common 
opinion among bank Managers that they are in danger of being charged 
a little higher in some instances simply because they are a bank — an 
institution which some seem to consider as made of money. 

Purchases of bank supplies are often made by subordinate officers, 
because they know just what they need, when the things bought are 
for use in their own departments. 

It should be a rule with bank officers never to buy for the bank any 
article which it does not really need, nor more of any given article than 
is really necessary. And in purchasing they should use the same degree 
of care in the matter of price that they would if they were making the 
purchases for their own home establishment. 

Though buying of the sort I have described may sometimes fall into 
the hands of the clerks, no bill should be paid and no expense charge 
entered upon the books of the bank until the same has been approved 
by the President or Cashier of the bank. This formal approval can 
be made upon the bills when bills are taken ; but when purchases are 
made, or expenses of any sort incurred which are not represented by a 
bill, an entry should be made upon a charge ticket, and the Book- 
keepers instructed not to enter any charge ticket which does not bear 
upon its face the formal approval of the President or Cashier. The 
charge ticket should be a regular printed form and always on hand, — 
it may be as simple as this (see Form 72) : 



TENTH NATIONAL BANK, of Chicago. 

JVLo^. 5 1 8cj o. 

UHAnVJ fc* CS>JfJLsUO<j6jL CX-C-XLJG_A>Oojt - 






$£50 
Approved, E. J. K., Cashier. 



Form 72. 

ADVANCED IDEAS AND METHODS. 

In the arrangement of the methods and machinery of banking, our 

bank officers should steadily endeavor to keep up with the times. 

' ' Keeping up with the times " is a rather abstract expression. Perhaps 

I might say, with more propriety, that banks should ever be on the 



284 PRACTICAL BANKING, 

alert and ready to adapt themselves to the changes that are constantly- 
going on in the outside business world. Trade, commerce, speculation 
and manufacturing are steadily increasing almost everywhere ; and the 
methods of conducting these various branches of business are every 
day changing. Banks must keep step with the procession. 

In an active bank, hardly a day passes without developing some 
new phase of business ; and new phases of business demand new phases 
of banking ; and that is the most successful and the most useful bank 
which most rapidly adapts itself to the times — places itself in the best 
condition for meeting the reasonable demands of the business com- 
munity. 

It is not easy for a bank to stand still in these days ; it must either 
go ahead or fall behind. 

The situation of the Bank of England is to-day quite an interesting 
illustration of this point. In visiting that old bank, I could not fail of 
noticing the presence there of an air of extreme conservatism in 
methods of doing business. Every thing in and about the bank, in 
arrangement and methods, seemed to me extremely old-fashioned. 
But the immense increase of the bank's business is now demanding of 
it an unusually large amount of clerical work. The venerable institu- 
is making spasmodic exertions to adapt itself to the demands made 
upon it. It seems to desire to move with the times. It has recently 
undertaken the inscription of a large number of new colonial loans 
and the banking conduct of many new issues. But the old bank is so 
antiquated in its methods and machinery, has been so long in the ruts 
and has so many slow old clerks, that Londoners complain that it can 
not cope with the details of the work that has come upon it, and are 
growling over its slowness in making transfers, conversions, etc. The 
venerable clerks of the Bank of England are really in danger of being 
driven out of their respectable senses by the great press of new work 
ihe times are bringing upon them. 

OVERWORKING BANK OFFICERS. 

This is but another term for defective management. There can be 
iew worse errors in the administration of the internal details of the 
bank than that of so arranging the help and duties of the various 
departments as to throw upon faithful, skillful and patient clerks too 
severe labors, too long hours, or too much responsibility and strain of 
mind and body. 

There have been many instances in banking, particularly in the large 
cities, where banks have for long periods, and through eras of great 
business pressure, been run with staffs of officers of altogether insufficient 
strength for the duties falling upon them. This method of manage- 
ment is always sure to prove in the end the poorest sort of economy. 

Good officers, ambitious of doing their very best, are, under such an 
administration, prematurely broken down. Others, who are less faith- 
ful, lose all courage and ambition under the undue pressure and 



SOME WORDS ON MANAGEMENT. 285 

confusion of the situation, and fall into shiftless and inefficient ways 
of work. Vacations, which should always be provided for in every 
bank, are broken in upon or entirely abandoned in these short-handed 
banks, and the general way of work there becomes a weary tread-mill 
sort of life. The bank in the end is as much a sufferer from this mal- 
administration as the employees, for frequent break-downs of good 
clerks occur, with the result of bringing in untried and inexperienced 
workers. Even aside from illness, changes in the working corps of such 
a bank as we are describing, are apt to be frequent ; for every man 
there, of ability and ambition, is steadily watching for a chance to get 
out of his bad place, and embraces the first hopeful opportunity to 
make a change. 

A bank situation, such as I have here described, comes under the 
observation of many an experienced banker — it is no fancy sketch. 

The responsibility for this most uneconomical sort of administra- 
tion of affairs almost always rests with the Chief Executive of the 
institution, who, in such cases, is quite sure to be a man who has not 
proper ideas of bank management, as far as details are concerned — 
who is really destitute of the executive ability necessary in his position. 

Somtimes the evil ways we have spoken of grow out of a want of 
proper feeling and consideration for subordinate officers on the part of 
Presidents or Cashiers. It is but rarely that the Directors are to blame 
in the matter. 

A good motto for any bank is this : Give no officer too much work 

or too little pay. 

BANK OFFICERS' SALARIES. 

I might carry out the very good principle of giving in the fewest 
words the greatest possible amount of information, by the simple state- 
ment that bank Cashiers and bank clerks should be paid for their 
services — not under-paid, not overpaid, but simply paid. 

I am not prepared to say that the bank clerks of the period are 
underpaid, neither am I inclined to say that they are often overpaid. 

It is possible that a few hints of value may be thrown out by 
considering for a moment the character of the services rendered by the 
laborers in question. A sense of justice prevails in the average 
business employer in circles of trade and commerce, general financing 
and banking, and failure to recognize and compensate help in these 
various departments of work comes more from a want of real knowl- 
edge of the value of services rendered than from any other single 
source. 

In the matter of services rendered by workers in banks, here are 
some points that deserve attention — points which I present with little 
regard to the order of their setting forth : 

A bank officer, competent to take an independent position in a bank 
— to manage a leading department — must be a man of good intellectual 
abilities, fine address, excellent English education, and of unswerving 



286 PRACTICAL BALING. 

integrity of character. To do the work well in such a position as we 
have in view requires a banking education; that is, the officer who 
steps into a place of this sort almost invariably steps out of what may 
be termed a long service of apprenticeship in which he has been able 
to earn only an apprentice's salary — the pay of a junior clerk. He is 
quite apt to reach the good place when well on in manhood, and, if he 
have average health and strength, the years that remain to him ere he 
wears out or becomes in the natural course of things less able than he 
once was to swing through the work of his highly responsible position, 
are none too many for him in which to do the work of putting by a 
little something for the rainy day which comes to all such workers. 

Again, the bank officer has to give bonds — bonds which are really 
costly to him whether furnished by paid guarantee companies or by 
generous friends. In the one case he pays money for them; in the 
other he reluctantly places himself under obligations which cannot be 
counted for nothing. 

The social position of a bank officer — a social position which may be 
said to be directly consequent upon his occupation — entails upon him 
expenses which cannot be shaken off. He must dress well, be well 
associated out of the bank, and in countless ways have expenses thrust 
upon him which he could easily shake off were his position a less 
prominent one. 

I shall not claim originality for these points and am glad to be able 
to quote from others in my support. I know of no better presentation 
of the subject than that made by John Stuart Mill in the following 
from his "Principles of Political Economy:" 

" A clerk from whom nothing is required but the mechanical labor 
of copying, gains more than an equivalent for his mere exertion if he 
receives the wages of a bricklayer's laborer. His work is not a tenth 
part as hard, it is quite as easy to learn, and his condition is less 
precarious, a clerk's place being generally a place for life. The higher 
rate of his remuneration, therefore, must be partly ascribed to 
monopoly, the small degree of education required being not even yet 
so generally diffused as to call forth the natural number of competitors, 
and partly to the remaining influences of an ancient custom, which 
requires that clerks should maintain the dress and appearance of a 
more highly paid class. It is usual to pay greatly beyond the market 
price of their labor all persons in whom the employer wishes to place 
peculiar trust, or from whom he requires something besides their mere 
services. For example, most persons who can afford to, pay to their 
domestic servants higher wages than would purchase in the market the 
labor of persons fully as competent to the work required. They do 
this, not from mere ostentation, but from reasonable motives — because 
they desire that those they employ should serve them cheerfully, and 
be anxious to remain in their service — because they do not like to 
drive a hard bargain with people whom they are in constant inter- 



SOME WORDS ON MANAGEMENT. 287 

course with — and because they dislike to have near their persons, and 
continually in their sight, people with the appearance and habits 
which are the usual accompaniments of a mean remuneration. Similar 
feelings operate in the minds of men in business with respect to their 
clerks. " 

Mr. Gfilbart adds : 

' ' There would be considerable difficulty in apy lying the rules laid 
down by political economists with regard to the wages of labor to the 
case of bank clerks. A banker does not hire a clerk because he is the 
cheapest man he can get, nor does he dismiss him as soon as he can get 
another man to do the same work at a lower price. He would not find 
it to his interest to do this ; for his work is of a peculiar kind. His 
clerks must have a certain degree of education, and of manner, and be 
taken from a certain class in society. They are not allowed to engage 
in any other employment. They have to maintain a respectable 
appearance. They must be qualified not merely for the lowest post in 
the bank, but must be prepared to take higher posts should vacancies 
occur. And in every post they are entrusted with a large amount of 
property, and upon their integrity and prudence much reliance must 
at all times be placed. 

All these circumstances serve to show that, in fixing the amount of 
their salaries, the banker should be anxious to err (if he errs at all) 
on the side of liberality. 

BANK CLERKS AND MARRIAGE. 

The young man who in this country applies for a situation in a 
bank, where the position is a subordinate one paying but a small salary 
— a salary fitted to a low round in the ladder of promotion — is often 
asked by Managers and Directors a great many questions relative to 
his general way of life, surroundings, home status, whether he is married 
or single, etc. 

But beyond these preliminary investigations, which often have con- 
siderable to do with coming to a decision regarding the fitness of an 
applicant for a position in a bank, there is not apt to be a very close 
inspection of the home ways of bank officers. Once in a position in a 
bank, the junior officer, who has entered the service as a single man, 
takes the question of whether he shall get married into his own hands 
and on his own financial responsibility without consulting Boards of 
Directors or any one else. A junior officer who becomes a married 
man, if he is a promising and deserving young man, is quite apt to 
receive froni observing Directors a recognition of his change of circum- 
stances in the shape of a slight advance in salary, an advance which is 
often repeated when, as time passes, the young clerk becomes more and 
more a family man. 

This is about all there is to be said regarding the relation of banks as 
employers to the question of the marriage of bank officers. 

In England matters in this regard take on a different aspect. This 



288 PRACTICAL BANKING. 

point is amusingly illustrated by the following significant paragraph 
from a London newspaper : 

The London and Provincial Bank has passed the following resolution : 

" The Board being of opinion that it is on many grounds inexpedient for clerks 
employed by the bank to contract marriages on insufficient means, 

" Resolved, As a general rule, but subject to any exceptional circumstances which 
may induce the Board to dispense with such rule, that in future, if any member of the 
staff whose income is less than £150 a year shall marry, he shall be disqualified from 
continuing in the bank's service, and will accordingly be required to retire from it." 

An American Board of Bank Directors which should pass a resolu- 
tion of this character would be pretty sure to follow it up, in case of 
the marriage of a clerk whom they esteemed, with a vote at once raising 
his salary to the sum which they had decided was sufficient to support 

a family. 

BANK OFFICERS' VACATIONS. 

All bank officers should be given vacations of at least two weeks 
annually. They are of advantage to the bank because they give an 
opportunity to deputize the work of absent officers to new hands, a 
change which is a benefit to the institution, since it absolutely inter- 
feres with the existence of any rust of management or the prevalence 
of dishonest practices in the department into which the fresh worker 
is introduced. Vacations are good for the employee because they 
recreate his mind and improve his health, rendering him the better 
able to do the work of his position when he returns. 

In organizing the staff of a bank, these furloughs should be kept in 
view, and it also should be fully borne in mind that there is another 
contingency to be thought of, and that is the liability to illness, which 
a distinguished writer has described as being one of the most promi- 
nent of the wastes and burdens of life. 

Officers should arrange among themselves as far as possible the time 
of their annual furloughs, that is, just when each shall go ; but these 
arrangements should be subject to the advice and approval of the 
management of the bank, the Board of Directors voting formally on 
each leave of absence so that there shall be on the Directors' records a 
minute of the period and length of absence of each officer. 

The Cashier should see that arrangements are made so that no one 
officer shall do more than his share of the extra work arising out of 
vacations. It is generally an excellent plan for the officers to have an 
understanding so as to be able to arrange this matter, also, among 
themselves, subject, of course, to the revision and supervision of the 
Cashier. Where there is not a sufficiently strong force to carry along 
vacation work in the way suggested, outside help should be generously 
taken on. In our cities and large towns there are always substitutes 
anxious to obtain vacation work. 

In some banks there is shown such a degree of parsimony in 
arranging work for the purpose of allowing vacations that the officers 
who are worked too hard on their return to make up for lost time and 



SOME WORDS ON MANAGEMENT. 289 

who do their own and other's work during vacation seasons would, if 
they had their way, do away entirely with their annual periods of 
absence. In banks where the situation is of this character the long 
Summer months which are generally the periods of bank vacations 
are looked forward to by the clerks with anxiety rather than with 
pleasure, and they all breathe freer and feel a sense of relief when the 
vacation season is over. The fault in such cases often rests with some 
chief executive officer who, from want of judgment or absence of 
proper sympathy, does not use his influence to see to it that the bank 
in his charge has help enough of the right description. It is very poor 
economy to run a bank short-handed, and neither the shareholders 
who own the bank nor the Directors who represent them are apt to 
favor such a policy. 

It has been urged by some very intelligent bankers, and others 
who have given this point attention, that bank officers' regular 
vacations, which take them away from their customary duties for a 
couple of weeks or so every year, are of questionable advantage to 
them, since these absences from work so throw them out of the habit 
of doing their regular, daily routine of labor at the bank as to render it 
very hard for them when they come back into the harness. Without 
doubt there is some force in this objection. And it may also be said in 
further argument of the same tenor, that the bank officer, in returning 
from his long vacation, which may have left him a little out of practice 
at writing, ciphering, and counting money, generally finds that he 
must at once bend to double work, for it is vacation season, and his 
return is likely to be the signal for some other officer to leave for a 
furlough of the same sort. 

A writer in "Blackwood " not long ago took the ground that it was 
very poor policy for bank officers, professional men, etc. , who have 
very regular daily duties, to leave them for vacations of longer than a 
day or so at a time, until the period arrived when they could throw 
down their business and retire permanently ; and the reasons advanced 
by this writer were about the same as those I have just named. 

But, notwithstanding these and other arguments in the same line, 
the privileges of bank clerks in the way of vacations are steadily, if 
slowly, increasing, and properly so. 

The constant tendency is toward seeing more and more clearly that 
to work well the worker must have occasional periods of rest and 
change, and the bank clck, with all the other workers, is the gainer 
by this growing sentiment. 

It is well to consider all these points, but I am far from willing to 
acknowledge that the arguments against vacations which I have just 
quoted are of a convincing character. The mental stimulus to a bank 
officer (whose daily routine of work must inevitably be of a monot- 
onous and wearying character) of a couple of weeks in a year entire 
absence from bank work, is of so beneficial a value as to be with 



290 PRACTICAL BANKIXG-. 

difficulty overestimated; and no bank officer who has opportunities 
ior such a change and relief should ever fail of taking advantage of 
them. There is little need in such cases of his traveling far or spending 
large amounts of money. What he specially needs is change of scene; 
and, if he is a city man, and the season is propitious, he cannot do 
better than go into the country and enjoy nature's green fields, woods 
and skies — taking his family with him, if he is so fortunate as to have 
•one, giving them also a season of rest and change, and, in new scenes, 
cultivating an acquaintance with them that is undisturbed by daily 
absorbing business cares. 

Bank officers, long in the ruts, and with many hooks that bind 
them down to regular home duties and cares, often find it difficult to 
start on a vacation, and often say they don't know where to go. But 
it is certainly very evident that the man who thus places himself 
completely under the harrow of business is most in need of being 
shaken out of the grooves in which he has fixed himself — is really most 
in need of a vacation when he is the most averse to taking one. 

In the matter of the length of vacations, here is an idea which I 
picked up in the Bank of England. That institution has to-day one 
thousand employees in its old headquarters in Threadneedle street. I 
■do not count the officers in its branches. At one time, say in 1820, it 
Jiad 1,300 employees. The average number of employees away on 
their holidays, all the time, is fifty. 

Think of it, a steady absence of fifty officers on vacations. In our 
banks, where the numbers employed are comparatively small, one or 
two is the average number away. 

But, I started to say, that in the Bank of England these grants of 
holidays are of unequal length — are graded according to the time in 
which the officer has been at work in the Bank, — the oldest workers 
having the longest vacations. It seems to me there is an idea here 
worth looking into on this side of the water. It may be that the 
veteran officer is not only entitled to, but really more in need of, a 
longer vacation than the lively young junior clerk. 

But I will not attempt to do more than throw this matter out for 
the consideration of my experienced banking readers. 

Here is another vacation idea which may seem sensible. Why may 
not large banks so arrange vacation matters that at least one of its 
officers shall each year have a longer vacation than the others — say 
time enough to get a little more than the usual rest and change, and 
to go a longer journey during the furlough ? The officers could 
arrange this little matter among themselves if so permitted ; and, in 
time, all would have the extension without setting up any troublesome 
precedents for others to find fault with. 

BANK HOURS. 

In New York the banks open at 10 o'clock in the morning and close 
at 3 o'clock in the afternoon. In Boston the banks nominally open at 



SOME WORDS ON MANAGEMENT. 291 

9 o'clock in Winter and 10 o'clock in Summer. But, under the 
Clearing-House arrangements of that city, settlements are made at 

10 o'clock all the year round, and so its banks may be reported as 
opening for business at about 9 o'clock in Winter as well as in Summer, 
since a later hour of beginning work would not give them time to get 
ready for the Clearing-House. 

With two or three exceptions the banks of Boston shut at 2 P. M. 
A few of its banks keep open until 3 p. m. There have been periodical 
attempts made during the last thirty or forty years, if not longer, to 
establish a custom of keeping all the Boston banks open until 3 P. M., 
after the New York style. But it would hardly seem consistent to 
adopt New York bank time at the end of the route — as far as closing 
business is concerned — -and not follow New York bank time in opening 
business. But it will be a long while before Boston falls into the 
habit of not buckling down to business before 10 o'clock in the 
morning, as is the New York way of business life. Boston is decidedly 
an hour earlier than New York in its morning business habits, and is, 
therefore, consistent in shutting its banks at 2 P. M. instead of 3 P. M. 
It is just as natural and easy to do Boston's banking business between 

9 and 2 o'clock as it is for the New York banks to do theirs between 

10 and 3 o'clock. In either place there is a large class of dealers who 
would always be late were the banks to run until midnight. 

In the cities of the South and West the banks generally run on 
New York hours— 10 A. m. , until 3 P. m. 

In country towns, everywhere in the States, banks are in the habit 
of shutting up awhile at 12 or 1 o'clock for a dinner hour for the 
officers, though the habit is by no means general. This is a good 
method, looked at from a dietetic stand-point. The old-fashioned 
hour of meals, which gave a dinner at noon-day, can not easily be 
improved on. 

About half the bankers of the United States are under the harrow 
of dyspepsia, caused by the want of a good dinner at the proper time. 
Too many of them run along year after year doing long hours of work 
in the time that stretches between the opening and closing of their 
banks on the poor support of a light breakfast eaten in haste with 
little appetite. 

Closing the banks on Saturdays at one o'clock, or even earlier, has 
always seemed to me an excellent idea, particularly for those located 
in cities or large towns. 

It is very proper that New York, our great financial centre, should 
inaugurate the half -holiday idea in this country, and when its success 
is clear, doubtless other localities will follow with similar legislation. 

The London bank clerks have recently petitioned their various Boards 
of Directors to close early on Saturdays, and the press of London 
has favored this early-closing plan with considerable unanimity. The 
bank Managers and many of the merchants oppose the move, and its 



292 PRACTICAL BANKING. 

success is doubtful. The bank officers of London, and of the United 
Kingdom generally, work long hours. They do not commence as early 
as here, but they usually work later. Their general habit is to get a 
solid lunch at about one o'clock, and to dine at six o'clock. The six 
o'clock dinner is a very substantial affair in England, and is not 
followed by much more in the way of evening teas, lunches, or suppers, 
except in the case of fashionable, unbusiness people, who turn night 
into day, going often, in the "season," to both the play and parties on 
the same evening. The last-named classes do not think of going to 
bed before midnight, and sleep late in the mornings, but these habits 
of sleeping are not those of the bankers and merchants of London. 

The legal view of banking hours is very clearly set forth in the 
following case : 

The bank which held the unpaid, matured and endorsed note 
handed it to its Notary to protest at 2 :30 o'clock, which was half an 
hour after the regular closing hours of all the banks in the place. The 
note was drawn payable at a neighbor bank, and at a little after 2 :30 
o'clock the demand was there made, and notice of its non-payment 
sent promptly thereafter to all the endorsers. At the hour of the 
notarial presentation of this note to the bank where it was made 
payable the doors of the institution were open, and several of its 
leading officers were there busily at work, one of whom seemed to 
have sufficient knowledge and authority to answer the demand with a 
prompt and decided reply of "no funds. " So far so good. But the 
note, which was one with a very bad promise, was destined to give its 
owners considerable trouble with its endorsers. The endorsers, wishing 
to evade their responsibility, availed themselves of the point which 
had come to their ears that a demand had not been made upon its 
promisor for payment at the bank where it was made payable during 
that bank's regularly advertised business hours. A long legal contest 
followed, which brought up for pretty thorough discussion and decision 
the questions of what are a bank's regular hours of business and who 
and what fixes the same. 

There are no statutes denning the business hours of a bank. The 
Directors of a bank, by by-laws, declare that certain hours shall be 
kept by the bank in its general dealings with the public and in its 
business of receiving deposits and paying checks. Custom regulates 
all keeping-open points outside of these by-law hours. 

In the case we have reference to, the Court finally very justly and 
correctly ruled that, if a bank was in the habit of keeping open until 
a certain hour after its defined time of closing, and responsible officers 
were in the habit of staying in the bank to attend to their duties up to 
that hour, ready and competent to respond to such demands, a notarial 
demand made at such an hour was a binding one. 

In old-times —in ante-Clearing-House days — the Boston bank officers 
did not, as a general thing, do a great deal before 10 o'clock in the 



SOME WORDS ON MANAGEMENT. 



293 



morning. Their custom in this regard may, possibly, have been set up 
early in the present century. 

The following curious document (see Form 73), bearing date at that 
time, throws a little light on this subject as well as on the ways and 
manners of the Boston bank clerks of that early period when there 
were only two or three banks in Boston. The paper tell its own story : 



<2%£^£-y ^6£ ^vtZZ^LtJC: £r &&?&4r£^?V 




?y£u**™<!-^z- ;£?^^/?t^f^^£& 







sst&r- t^i.^ t 



vvfal &k*iJL-~<&4*r-4,. /fay. 








Form 73. 

The following was voted at the next meeting of the Board of Directors : 

Voted, In consequence of the application of the officers of the bank that, until 
the 1st of April next, the bank be opened at 10 o'clock in the morning, 

Voted, That the good conduct of the officers of the bank, so far as the same 
has come to their knowledge, merits the entire approbation of the Directors, and 



294 PRACTICAL BANKING. 

that the said officers respectively be requested to accept the thanks of the Board 
for their attention and assiduity. 

Voted, That the Cashier communicate the preceding votes to the officers of 
the bank. 

This petition and the reply to it certainly show a kindly feeling on 
the part of both officers and Directors of this most excellent old bank 
— a bank which still does an active business, and stands, as it has 
always stood, among the first in its city. Every man who signed this 
paper is dead. But many of these petitioners were well-known to the 
bankers and business men of the present day. Some of them after- 
wards became very prominent bankers. 

Mr. Lash lived to be the oldest active Book-keeper in Boston. 

M. S. Parker was Cashier of the Suffolk Bank, at the period when 
it was conducting what is known as the ' ' Suffolk Redemption System." 

Chester Adams was afterwards a prominent Boston bank President. 

BANK LUNCH-ROOMS. 

Bank lunch-rooms are a more common thing with us than they 
were in former times. In fact, twenty or thirty years ago such insti- 
tions were hardly known at all in this country. 

The Bank of England has a very fine dining, or lunch-room, where 
all its many hundred employees are served with an excellent mid-day 
meal. I had an interest in looking at the arrangements of this 
commodious eating hall when I visited the old bank, and I found its 
arrangements of the neatest and most attractive character, and the 
food served most excellent, though plain. Beer, bread, cheese and 
cold meats were the principal articles served. 

It is not desirable to have bank officers out of the bank — or, at least, 
out of immediate call — during bank hours. 

In banks where the working hours are long, it is certainly an 
excellent idea to have a lunch-room connected with the banking 
rooms, and furnished, at the proper time, with a substantial lunch for 
the officers — a lunch to which they can repair in turn and enjoy it at 
their ease, being allowed a reasonable time for it, which reasonable 
time can be all the more conveniently allowed by the bank since it 
has its officers right at hand in case of a sudden demand for any one 
of them. 

I have mentioned beer as being, of course, one of the substantials 
and inevitables of an English banker's lunch. Beer is certainly rather 
a mild stimulant, and there may be something in the English climate 
that conduces to English beer consumption, and possibly to its 
innocent consumption. But I am writing for this side of the water. 
Here my latitude is certainly wide enough. And I have no hesitation 
in saying that the American bank clerk is better without than with 
stimulants, be they mild or strong. The bank officer, in health and 
strength, is the last man that should indulge in their use. He needs, 
pre-eminently, a clear head and a steady hand, a cool grasp of his 



SOME WORDS OX MANAGEMENT. 295 

business, and the steady presence of all the best faculties of his nature. 
Of all these he is more sure if he carefully puts aside all stimulants. 

Where bank hours are not long, it is better for the bank officer- 
to eat but little, if anything, between his breakfast and the hour when 
he can shut his ledgers and turn the keys upon his vaults. In order 
to stand up well under the long strain that comes upon him, as he toils 
at the bank from morning till dinner, he should endeavor to grow into 
the habit of fortifying himself with a substantial breakfast, and as I 
have elsewhere said may acquire appetite and a relish for this meal by 
early rising and a taste of out-of-door life in the morning. 

TREASURY AGENTS. 

Treasury agents for National banks, whose duties are to witness 
the destruction of bills redeemed and to make annual examinations of 
United States bonds on deposit at Washington as security for circula- 
tion, are formally selected by the banks themselves, and under Sections 
5166 and 5184 of the Revised Statues of the United States are duly 
made their attorneys for the discharge of the commissions we have^ 
described. 

With regard to the matter of selection and giving commissions to 
these agents there is a point which needs a little explanation. The 
Bank Act provides that they shall be chosen and made the banks' 
attorneys under such regulations as the Treasury Department may 
establish. The Treasury Department simply forwards to the banks a 
blank commission for these agents which is to be filled out and signed 
by the Cashier. The proper procedure in such cases is for the Directors 
of the banks, by a regular vote, to make a selection of their agents^ 
and authorize the Cashiers or Presidents to sign the papers making 
them their agents for the work in question. 

It may come within the scope of the regular duties of Presidents or 
Cashiers to sign, as representatives of their banks, documents con- 
stituting parties their bank's attorneys for some routine duties, such as 
completing transfers ; but where a selection and action of the character 
we have described is to be undertaken a regularly recorded vote of the 
Board of Directors is a more proper course. 

This matter of selecting these Washington agents has grown to be 
such a routine business with the banks that it is possible they have not 
in all cases given very close attention to it. Very particular care 
should be taken, and only men of the highest standing in point of 
character and experience should be selected for the duties. 

Our banks should also bear in mind that these approved agents: 
hold themselves in readiness to furnish early Washington information 
regarding any matters of special interest to the banks. They are as a. 
class gentlemen of wide experience and large intelligence in banking- 
matters, and their facilities for investigating points in banking which. 
have a Washington bearing are quite extensive. They all undertake 
to furnish information to their patrons on bank matters without, 



296 PRACTICAL BAN-KING. 

charge. Their regular schedule of fees for witnessing the destruction 
of bills and examining bonds is as follows : Banks with a capital of 
§100,000 or less, $5 per year; banks with a capital from $100,000 to 
$200, 000, §10 per year; banks with a capital from $200,000 to $400, 000, 
$15 per year; banks with a capital from $400,000 to $500,000, $20 per 
year ; banks with a capital over $500, 000, $25 per year. 

AGENCIES OR BRANCHES. 

The branch bank is to be seen in perfection under the English 
banking system ; and in Canada, and in other of the British colonies, 
the methods of the mother country in this regard have been fully 
copied. Our National banks — in some points only branches of one 
great central United States bank — are in other respects separate, indi- 
vidual organizations. Those of them having a large capital, and 
established in the great cities where money is apt to centre, sometimes 
agitate the idea of setting up branches in towns and cities in outlying 
States where rates for money rule high, and where the financial wants 
of the communities are of a pressing character. There seems to be 
nothing in the Bank Act to prevent such movements, yet from the 
first the banking department has set its face against such branching- 
out ideas. 

The plan of transferring stagnating capital of large and well-man- 
aged banks from such points as the great cities of the East, where 
extreme difficulty is sometimes experienced in keeping up their loans 
on home investments, to branches in new and rapidly growing points 
in the far West, where paper is clamoring for discount, has certainly 
much that is attractive about it. 

BANK ATTORNEYS. 

It is an excellent idea for every bank to have — what it is very com- 
mon for the banks in New York, Chicago, Boston and other leading 
places to have — a special lawyer of their own. And it is not a bad 
plan to have him retained by the year, at a regular salary, with, of 
course, the understanding that, in case of emergencies arising from the 
precipitation of an extra amount of legal work upon the bank, he shall 
have assistance retained and paid for by the bank. The advantages of 
keeping a regularly salaried solicitor are almost too evident to be 
described. There is hardly a passing day in an active and intelligently 
managed bank that does not bring with it some new question in 
banking, and many of these questions have complicated legal aspects 
which could, with a deal of satisfaction, be referred to the solicitor. 

Then again, in every live bank, the officers, from the President 
down, are on the alert to learn all there is to be learned about banking; 
and an easy and ever-present contracted-for opportunity for any one 
of these officers to talk over the questions of the legal rights and duties 
of bank and dealer in such matters as the management of business paper, 
transfer of shares of the bank, and shares held as collateral, etc., etc., 



SOME WORDS ON MANAGEMENT. 297 

would be of great advantage to all concerned. As it is, those banks 
that, for the sake of economy, run along without any attorney, are 
placed in the undignified position of often being obliged to steal their 
law from casual legal customers — picking up, in some cases, no doubt, 
carelessly expressed judgments, given without any sense of paid-for 
responsibility — what old Chief Justice Parsons termed "horse-back 
opinions." 

The economy of the plan I have named must be evident ; for a live 
bank counsel would soon become very expert in banking law, would 
have a special interest in keeping his bank out of lawsuits, and, on the 
whole, would be pretty sure to fully earn his salary by his advice and 
general services. 

NATIONAL BANK EXAMINERS. 

When a National Bank Examiner enters a bank at the present time 
for the purpose of seeing that everything there is as it should be he at 
once takes full possession. If it is a bank having a large business and 
many departments — departments which are inevitably mixed and 
intertwined with each other in their every-day transactions — he stops 
the work of each division and puts the cash and securities belonging to 
them under his private seal. By doing this he effectually guards 
against any concealment by defaulting officers of deficiencies in their 
own department by temporary and secret transfers of property from 
other divisions of work. 

A brief explanation of what has been done by defaulters in banks 
by the methods just alluded to will give a very good idea of what 
might be again and again repeated, with variations, if the Bank 
Examiner's checks and guards just described were not now invariably 
put in force. 

The Receiving-Teller of a bank, which was undergoing an exam- 
ination that occupied several days, received back his cash from the 
Examiner, who had thoroughly gone through it and found it correct 
in all points. The next day the same Examiner passed through the 
loan of the bank and examined all the notes discounted and the 
collateral security attached and reported them all correct and in 
harmony with the books of the institution. But dishonest collusion 
existed in this bank between the Teller and Discount Clerk, and 
important deficiencies in collateral belonging to the loan were secured 
from detection by the aid of cash temporarily borrowed from the 
Teller after his cash had passed under the Bank Examiner's scrutiny 
and before the loan was examined. It is easy to see how cash and 
vouchers may be made to do double duty in the hands of cunning 
defaulters where there is a lack of proper vigilance on the part of the 
Bank Examiner. 

The experienced and sagacious Bank Examiner is always sure to be 
alert in the matter of watching in an unobtrusive manner the ways, 
methods and general carriage of the bank officers who are around him 



298 PRACTICAL BANKING. 

in the bank he is inspecting. It may be that at times he recalls an 
experience of this character. 

A Bank Examiner became anxious about the discount department 
of a bank he was examining. He became suspicious, from certain 
circumstances, that the head of the department was trying to do 
something wrong. Placing a check in the right place at the proper 
time he detected this officer endeavoring to smuggle into the bank 
United States bonds which he had borrowed somehow to make up 
existing deficiencies in his collaterals. 

There has been, particularly within the last few years, no small 
amount of sharp criticism of the methods and management of these 
important representatives of the Treasury Department. This has 
grown out of the fact that in many instances — instances which have 
become famous banking scandals — the most startling defalcations and 
irregularities have been carried along in banks right under the eyes, as 
it were, of Bank Examiners, and disastrous and most culpable instances 
of mismanagement have been allowed to exist where signs of the 
wrong-doing had been observed and reported to the Comptroller by 
the Examiners. 

There is not a doubt but that it is absolutely impossible for a 
United States National Bank Examiner, or any other bank inspector, 
to make such examinations of our banks as shall ensure the public, 
every time, that there are no defalcations existing or brewing in any 
of them, although these officials can do much towards unearthing, or 
preventing dishonest practices in the banks. 

It is time that it was more generally understood that neither 
National Bank Examiners nor the presence in a bank of the most 
perfect system of management, and the best of arrangements of checks 
and guards against dishonesty of officials, can absolutely prevent a 
trusted bank officer in a position of responsibility from stealing. 

Regarding this matter of the mismanagement of some National 
banks in the face of bank examinations by the Treasury inspectors, 
the situation is somewhat as follows: A Bank Examiner finds, for 
illustration, that a bank President is using too much of the money of 
his bank — has too much of his paper in its loan — and that he is, 
perhaps, deep in speculations of a questionable character, which are 
endangering himself and his bank. The Examiner reports this to the 
Comptroller. The Comptroller writes an admonishing letter to the 
Directors of the bank. He does little more than this, in very many 
cases, because he knows that the Directors have taken an oath that 
they will attend faithfully to their duties, and because if he does 
anything more he must take very decisive action. 

There seems to be no half-way position for him to take in the 
matter. The bank must be allowed to go on under the management of its 
Directors, or it must be proceeded against with a view to closing it up. 

It might be well for Examiners, who have found banks indulging 



SOME WORDS ON MANAGEMENT. 299 

in practices that were not satisfactory, but which they promise to refrain 
from in future, to make early revisits to them to see if the promised 
reforms have been instituted. 

There is one incidental advantage which is an outcome of the rela- 
tions existing between every National bank and the banking bureau at 
Washington that is of no small value. In the matter of circulating 
notes issued, bonds of the United States held as security for the same, 
and the maintenance of a cash redemption reserve fund at Washington, 
the banks and the Treasury Department may be said to act as checks 
and guards of each other. 

The system in this regard is of such an admirable character, and is 
so well managed, that there has not been an irregularity since National 
banks began to exist. 

When the National Bank Examiner goes through a bank he looks 
carefully into every item on its books which has any connection with 
the central bureau at Washington. If he finds figures which do not 
seem clear and consistent he confers at once with the Treasury Depart- 
ment for the purpose of obtaining explanations and reconcilements. 
His final reports on every bank go direct to Washington and are there 
carefully examined and compared with those figures in the banking 
department of the United States Treasury relating to them. 

The statements which the banks make out five times in the year by 
order of the Government go through the same scrutiny at the Wash- 
ington banking department, and are there carefully examined and 
compared with what may be termed the books of the great central 
United States bank at Washington, of which all the National banks of 
the country are only branches. 

It is not easy to see how anything can long go wrong or irregularities 
occur in those portions of National banking which are thus made to 
work together — to prove and try each other in the manner we have 
described. Outside and beyond there are, of course, chances for fraud 
and defalcation which experienced bankers fully realize. The question 
often arises whether, for instance, there is not a danger that National 
bank bills may be printed surreptitiously in Washington by dishonest 
officials — printed from the genuine plates of National banks and put in 
circulation with forged signatures. 

BANK DEFALCATIONS. 

I hope, before I complete this topic, to make myself fully under- 
stood when I say that a large degree of the safety of a bank, as far 
as immunity from defalcations is concerned, depends upon the tone 
which exists within the bank — which rules in the administration of 
its internal affairs. 

That bank runs along the best and does its work the easiest, the 
most skillfully and most securely, which cultivates and maintains what 
may be termed the most healthful and harmonious internal discipline. 
Negative illustrations of this point may perhaps be presented the most 



300 PRACTICAL BANKING. 

easily and concisely, since such seem to come the most frequently 
under the direct notice of the practical banker. 

A bank is in a bad way — is running along with a deal of dangerous 
friction — when it is manned by a corps of officers who do not fall into 
habits of mutual regard for and complaisance towards each other 
while thrown together in the discharge of their daily duties. 

The bank whose superior officers do not do all in their power to 
aid and instruct the officers under them — all they can to make them 
contented and to assist them in the work of qualifying themselves for 
advanced positions — is not a bank with a safe and desirable adminis- 
tration of its internal affairs. 

The bank whose Directors and officers, from the President down- 
wards, are prone to indulgence in stock speculations, and who seem 
to be currently more taken up with the occupation of studying the 
vibrations and revolutions of the share Exchange than with the 
business of banking — the business which is nominally their sole pro- 
fession — cannot be considered an institution that is managed with due 
prudence and safety. Defalcations are particularly liable to be the 
outcome of such a situation. 

The bank which is managed without a due regard for the statutes 
of banking, and with an open disregard of the principles of strict 
honor and honesty, equity and fairness, is surely in a bad way, and 
also particularly open to losses from the irregularities of employees who 
have been demoralized by their surroundings — who have lived under 
the influence of bad examples. 

So I might go on with my illustrations. But enough has been said 
to point my moral and explain my drift. 

After all care has been taken and notwithstanding good discipline 
and management, sometimes the trusted clerk is found untrustworthy 
and the apparently honorable man proves to be a rascal. Then comes 
a new lesson. 

Whenever a careful and well-managed bank meets with a loss from 
the defalcation of some officer whom it has employed in some one of 
its positions of trust and responsibility, it at once endeavors to set up 
in the path through which the loss has entered the bank some guard 
which shall prevent a recurrence of the same sort of irregularity. And 
where a bank has had contests and losses, which have been the outcome 
of some imperfect methods of administering its affairs, it at once 
attempts to institute improved methods, which shall forever prevent 
the coming of similar difficulties. 

In this way the whole system of banking, in respect to its internal 
administration, has been built up — has been brought forward to its 
seemingly well-nigh perfect condition, as far as its methods and 
machinery are concerned. 

But, with the enormous increase of business which characterizes the 
times, and the discovery of new methods of fraud, forgery and swindling, 



SOME WORDS ON MANAGEMENT. 301 

of all sorts, new appliances for protection against these latter will be 
in constant request. 

But these guards and these improvements must not be temporary 
matters, to be given up as soon as the first excitement is over. I will 
cite a few actual cases. 

The bank had been defrauded of two hundred thousand dollars by 
clerks who had covered their wicked tracks by a free use of the eraser. 
A committee of the Directors, who afterwards sat upon the question 
of how the bank should in future be made safe, decided that in future 
no erasers should ever be used in that bank. For a while this rule 
was carried out, but to-day as many erasers are used there as ever. 

The bank had lost by defalcation of officers who had been stock 
speculators. The Directors decided that they would henceforth employ 
no officers who speculated in stocks. In time this rule became a dead 
letter, and the officers of that bank ' ' invested " their money about as 
they pleased. 

The bank had lost heavily by a defalcation of its officers, who had 
tampered with the pass-books. The Directors decided that a rule 
should be set up in that bank that no balanced pass-book should be 
delivered to a depositor at the end of the month until it had been 
examined by the President of the bank and by him compared with its 
trial balance. To-day the pass-books in that bank are handed out at 
the end of the month by any of its officers. 

The bank had been half ruined by defaulting clerks who had 
operated between regular examinations — examinations which came 
at stated times, and which the sharp clerks duly prepared for. The 
Directors made a rule that irregular — surprise — examinations should 
be a feature of their system in future. To-day they have no exam- 
inations of that sort there. 

And so I might go on, giving many more illustrations of this sort, 
drawn from my personal observation. But I have given enough to 
point the moral which I have in mind, which is, that it would be well 
for our banks, in times of internal peace and freedom from irregu- 
larities, to live up to some, at least, of the rules established for their 
safety in times when they were being shaken up by defalcations. 
SUNDAY WORK. 

No bank officer should work on the Sabbath except when it is 
demanded by necessity. There have been times during the Rebellion 
when some very patriotic and holy work was done in many a Northern 
bank on Sundays. In a time of terrible National distress the London 
"Times" once issued the only Sunday edition it ever printed, and that 
famous Sunday "Times " was sent forth for the purpose of announcing 
that the English Cabinet and the Directors of the Bank of England 
had had a Sunday meeting and that the outcome was a suspension by 
the Bank of England. 

There are bank officers who of their own choice, and simply because 



302 PRACTICAL BANKING, 

they did not know what else to do with themselves, have fallen into 
the habit of going to the bank and doing clerical work on Sundays. 
Some have said that the complete quiet and absence of all interruption 
which they could get when at this Sunday work made it the best day 
in the week in which to bring up back work or get work ahead so that 
they need not be in a hurry on Monday. Viewed from any correct 
stand-point this habit of working on the Sabbath is a very objection- 
able one, and if bank officers are disposed to indulge in it the Directors 
should forbid it. 

There is plenty of evidence of the highest character and authority 
proving that it is better physically, mentally and economically, throw- 
ing entirely out of the question all reference to its moral and religious 
aspect, for a man to do all his labor in six days and rest on the Sabbath. 
NOT A MODEL BANK. 

I think a good point may be scored by closing this long chapter 
with a brief picture of a bank whose methods and machinery are in 
all points nearly as bad as they can be. I think it will be both 
amusing and instructive to good bankers. The bank in question is 
an old-fashioned institution, located in a small interior town, and is 
in good and regular standing. The men who run it were not born 
bankers, yet they are honest men. Its books are kept upon a sort of 
homespun system from which it would be impossible to gather any 
forms for reproduction as models. Its pass-books are not balanced at 
any regular time. They get them in when they find it convenient to 
do so — say on an average of once in three months. Trial balances 
and general settlements of the leading books of the bank are not 
considered important adjuncts to the payment of a dividend or the 
preparation of reports. Certificates of deposit payable on demand are 
issued against which their holders are allowed to draw checks at their 
pleasure, returning the original certificates when the money is all 
drawn out — if they do not forget to do so. The letters which the 
bank sends out are not copied and none which it receives are filed or 
preserved. They are all thrown into the waste basket. The same 
disposition is made of all the tickets and other papers used in the 
curreut business of the bank. One might go on indefinitely describing 
the ways of this very unsystematic institution, where everything in 
methods is about as it should not be. The example must be admitted 
to prove that it is possible for a little bank in honest hands to run 
along for years without great disaster and not have any system in 
managing the details of its business, but it is a possibility which a 
bank should not experiment upon. 



ON PERSONAL MATTERS. 



CHAPTER XIX. 

ON PERSONAL MATTERS. 

Let us take a glance at what may be termed the correlations of the 
banking business, and see how the various departments and officers in 
charge are related to one another and intertwined and connected in 
the routine operations which relate to the management of banking 
details. In taking this view of the whole corps of officers and their 
work we must look at the bank which they are running as an entire 
and complete machine, all the wheels in motion, the whole concern in 
actual operation and doing its accustomed work with regularity and 
success and with as little friction as possible. The President, if there 
is a working officer of this description, stands at the head of affairs, 
presiding over the meetings of Directors at which all the most 
important questions relating to the management of the funds of 
the bank are decided and where the general policy of its adminis- 
tration is discussed and settled. In the interims, between the regular 
meetings of the Board, the President is supposed to do nothing relative 
to the management of his bank not in harmony with the ideas of the 
Directors, as far as he has been able to ascertain them ; and he is also 
supposed to be in daily consultation with individual members of the 
Board, particularly those of the Finance Committee, as they from 
time to time drop in upon him. 

The Vice-President, if the bank has one, is a "double" of the 
President. When the President is absent he assumes his full duties, 
and when he is present he assists him in the presidential work. 

The President looks upon his Cashier as his chief executive 
officer, and bears somewhat the same relations to him as the 
captain of the steamer does to his first officer, or the colonel of the 
regiment to his lieutenant-colonel. He holds him responsible for 
carrying out the orders executing the will of the Board of Directors, 
expects him to manage in full the details of the business of the bank, 
to be responsible for the general administration of affairs by his 
subordinates, and to be a faithful and skillful counsel and adviser 
in all matters relative to the affairs of the institution. The Directors 
are supposed to give the Cashier all the officers he needs for the 
various departments in his charge, and through their President they 
hold him responsible for the general faithfulness of these subordinates. 
The Cashier is an official through whom all the business of the bank 
may be said to pass. He stands at the head of the establishment, 



304 PRACTICAL BANKING. 

distributes the work, watches its progress, and receives and sums up 
the results. He stands, as it were, at the gate of the bank, welcomes 
all who have legitimate business with the institution, receives its 
correspondence, scatters its contents, whether they are enquiries or 
remittances, among the departments and officers to whom they belong, 
and sees that due credits are given, needed replies made, and prompt 
acknowledgments rendered. 

The Cashier, or his direct assistants, checks off the remittances 
which reach the bank through the mails, receives from the President 
the paper which has been discounted by the Board, and passes it over 
to the Discount Clerk for computation and credit. 

The Discount Clerk, the official whose sole duty in a large bank is 
that of calculating the discounts on paper taken by the bank, and 
filing, recording and attending to the collection of the same, passes 
the proceeds of all discounts to the Receiving-Teller for credit, to the 
Cashier for remittance, or pays out the net amounts directly through 
the hands of the Paying-Teller. As the in-town paper in his files 
matures he gives the same to one of the. Tellers to collect. His out-of- 
town paper he passes over to the Cashier's department a sufficient 
time in advance of its maturity so that it can be sent forward for 
collection at the points where it is payable. He compares his daily 
records of maturing paper and discounts paid with the figures on the 
books of the Paying-Teller and the Receiving-Teller, which must tally 
with his transactions. 

The two Tellers compare their daily balances with those of the 
Book-keeper. 

The Cashier gathers from the books of the various departments of 
the bank a comprehensive abstract of all the receipts and disburse- 
ments, and makes up a summary of figures which must accurately 
show in outline the entire transactions of the day. 

The Collection Clerk, whose duty it is to take in charge and collect 
all paper which comes into the bank for collection, other than that 
which goes at once as cash into the hands of the Teller, is brought 
into direct connection with the Messenger, who is a deputy of his, and 
this latter officer makes returns of work to the collection department. 

The Book-keeper makes those detailed debits, credits and balances 

which are the outcome of the transactions in all the other departments, 

and his pages are both a history and a present statement of the bank's 

cash affairs. 

STEADILY COURTEOUS. 

One of the first duties of all bank officers is to be uniformly and 
unwaveringly polite — courteous — to every person dealing with them. 
The wearing duties of their positions, various sorts of physical and 
mental disabilities which sooner or later come to bank workers, for 
the reason that their lives are confined ones, and because of the mental 
strain put upon them, the difficult character of many of the dealings 



ON PERSONAL MATTERS. 305* 

they are constantly having with the outside public, and the idiosyn- 
crasies and peculiarities of many customers, are, each and all, causes 
which render it hard for these officers to maintain, at all times, this, 
pleasant equanimity which I have demanded. But, the greater the; 
difficulties, the greater should be the struggle to attain what I have 
described as being so absolutely necessary, and the greater the honor 
to which the bank officer is entitled for his successful carriage under 
such trying circumstances. 

Bank managers should make it one of their most vital duties to see 
that every subordinate in a bank behaves like a gentleman, in all his- 
intercourse with its customers. 

Although it may be one of the hardest duties devolving upon the^ 
clerk to maintain this uniform politeness and good nature, under the 
annoying and vexing circumstances with which he is liable to be so- 
often surrounded, with resolution and practice he may live up to the 
standard I have set up. 

From his position behind the bank counter he must dispense equal, 
politeness, consideration and courtesy to all with whom he deals.. 
The size of a person's bank account, his degree of acquaintance with: 
the methods and machinery of banking, his claims upon the bank 
officer for time and attention, his agreeable or disagreeable ways, 
should not have the slightest effect upon the deportment of the bank 
officer who is called upon to give him attention. And, while he is. 
giving him attention, it should be the most undivided and interested. 

Great care should be taken to avoid airs of indifference or 
superiority, though the matter under consideration may be of the 
most trifling importance, and the dealer presenting it the most 
unreasonable and unwelcome person to be imagined. 

From the Messenger, who delivers the notices and presents the 
drafts, to the Paying-Teller, who scatters all the money, all the bank 
clerks should understand that the highest civility is a part of the code 
of their bank. And upon the way such a code is lived up to may" 
depend much of the success of the bank. 

Here are actual cases. 

The bank had an account with a large bank in an interior town, 
which account was a reciprocal affair, yet of large value to the city 
bank, for the country bank kept with it a heavy balance, and also did 
its interior collections, which were payable in its district, on very 
advantageous terms. The account was of long standing, and the 
Cashier of the country bank had made many visits to his city corres- 
pondent and was well-known there ; but his President seldom went to 
the city, and was not known at all at his corresponding bank. One 
day this President called at the city bank. Its President, who 
happened to be in attendance and to receive him, did not chance to 
be in a gracious mood, and greeted the country banker, who was a 
strong, able, yet unassuming man, in a rather blunt and indifferent > 



306 PRACTICAL BANKING. 

manner. Without being actually rude, there was a nameless some- 
thing about his address that was exceedingly ungracious. The result 
was that the country banker changed his city correspondent. He ran 
the country bank, was one of the largest owners of its shares, and was 
one of the best men in his State. 

This is a simple incident. It has its lessons. Many banks, not 
learning them in advance, have lost accounts in the same quiet way. 

The good-hearted but overworked Cashier of an old-time city bank 
used to figure in this way : Enter country Cashier — a modest, but an 
able man — who was a leading banker in his State. He passes over his 
carpet-bag to the city Cashier, and says he will call later and fill up 
with his redeemed bills. The city Cashier seizes the bag with a growl, 
throws it across the bank with a whack, and goes about something 
«lse. The country bank does not withdraw its account, but only 
because, in those old State redemption days, it could go nowhere else. 

I recollect that I once heard an old merchant speaking of the 
various bank officers he had known upon a certain street, and 
describing the characteristics of each one of them. Coming to Mr. 

, who was at the head of the largest bank in the place and had 

l>een its successful President for many years, having worked his way 
up to that position after serving in almost every other capacity in the 
bank, the merchant remarked that this President was an able man, 
but that he owed much of his success in life to what might be termed 
his uniform, unswerving courtesy. And then he related the following 
incident illustrative of the politeness and thoughtf ulness of this officer : 

' ' More than forty years ago I was an inexperienced, new boy in a 
counting-room in this city and knew nothing about the town, business 
or the banks. My employer handed me a check to collect on the 
bank where he made his deposits. I did not know one bank from 
another — in fact supposed a bank check could be collected of any 
bank, and that it did not make the slightest difference at what bank 
I presented that individual check. So I stumbled into the first bank 
of which my eye caught the sign. It was not the right one, and the 
Teller savagely asked why I brought that check to him, but did not 
.give me any clear explanation of what I should do with it. Neither 
did some other Tellers to whom I wrongly presented that bothering 

check. But when I came to the bank where Mr. was then 

acting as Paying-Teller I was treated with a kindness and courtesy 
which I shall always remember. He explained to me that the check 
should be presented to the bank upon which it was drawn, told me 
how to find that bank, and did it all in such an attractive, pleasant 
way that I felt happy at once and was very grateful to him. And 
now," said the merchant, ' ; I am going to see that man. The old 
gentleman is ill, I hear, and I will amuse and interest him by telling 
him this little story of the days when he was a bank Teller. " 

The politeness and courtesy I have named as being demanded of 



ON PERSONAL MATTERS. 307 

the good bank officer in his dealings with people outside his counter, 
should also be as strictly practiced in his intercourse with all his 
fellow bank officers with whom his daily life is spent behind the 
counter. Here he should be just as kind and polite to his humblest 
fellow laborer as to him who is in the highest position. The janitor 
should be treated just as politely and kindly as the Chairman of the 
Finance Committee or the President of the bank. 

Without doubt these suggestions may seem to many very common- 
place — of a character so trite as to belong to a class of things that go 
without saying— yet the man of business is called upon to observe so 
many violations of the rules I have laid down that he will welcome 
the suggestions here made. 

LEISURE TIME IN THE BANK. 

Bank officers, while at their desks and counters, should give the 
closest attention to the duties of their position. These duties may not 
always keep them closely occupied, because large and small banks, 
very active banks, and banks which are not stirring institutions are 
obliged to have their staff of officers of a size adequate to get through 
the work in the busiest times. So from necessity there are days when 
many of these officers have very little to do. But they have, never- 
theless, to be at their posts waiting for business that will not come. 

Banking is a very intermittent business. Sometimes bank officers 
feel as if they were nearly worked to death. At other times they find 
they have nothing to do. This is an unpleasant feature of their 
business. As long as they have to be at their desks they would rather 
have regular and steady work. As it is, what shall they do with their 
leisure time? Reading newspapers doesn't look well and does not give 
a business aspect to the bank, and, besides, they are an injury to the 
mind. This poring over one daily paper after another, reading and 
forgetting as soon as read many things which are not worth reading at 
all, is weakening to the mind. All business men should read the 
newspapers, but the question is how to read them — how much time 
to spend over them. The late Wm. H. Prescott, who was one of the 
busiest of scholars, told a friend that he gave just ten minutes a day 
to the daily papers. Mr. Everett had the same habit. A bank officer 
would do well to devote his time in the bank when he has leisure to 
perfecting himself in his profession by learning thoroughly every 
department of business that is going on about him. He can also make 
a practice of studying into the general science and philosophy of 
banking, finance and political economy. 

These quiet times may also be used to a proper extent for attending 
to personal matters in the way of correspondence, etc. The bank is 
not the place where a bank officer is expected to transact his private 
business of a general character, but he certainly may occupy otherwise 
unoccupied moments in personal employment of some kind. 

But while employed in this manner, he should expect that about 



308 PRACTICAL BANKING. 

all he may be doing will be subject to all sorts of interruptions and 
casual inspections by anybody and everybody about him; and it is 
well for him to avoid even the appearance of a wish to shun observa- 
tion. I once heard an experienced bank man say to a boy who was 
about entering on bank work : ' ' Do your best ; learn all about banking, 
and do its work when it has any work for you to do. Between whiles 
you may, without offense, write private letters at your own desk; but 
don't try to hide them from any one ; and if the President or Cashier 
comes along and wishes to read what you are writing, let them read it, 
with the hope that it may do them good. Don't try to put it out of 
sight, as if it was a thing not to be seen, or as if you had not the 
utmost confidence in your superior officers. Have your own private 
stationery, stamps included. It is well to draw the line here. Don't 
make private use of even small items of corporation property. " 

HANDWRITING. 

The mechanical work of writing is, to most people, an occupation 
that is tedious and wearisome. It is for this reason that the type- 
writer and its most convenient complement, the stenographer, have 
been most heartily welcomed by those who are in the harness of 
literary work, correspondence, and other sorts of occupations requiring 
a large amount of writing; and all young men entering banks and 
counting-rooms, who have good heads and fingers for these trades, are 
advised to learn short-hand and type-writing. 

But it is not necessary for me to say that while the writing machine 
does good work in its place, there is an immense amount of good 
honest hand labor with the pen which no machine can touch. For 
this reason every bank officer ought to be able to write a good, 
legible hand. And there are few who may not be able to do this 
if they take proper care and pains in the matter. It is not by any 
means necessary that the penmanship of any man should be what is 
termed elegant-looking from the standpoint of the writing-master, but 
it is necessary that it* should be unmistakably legible — easily and 
readily readable. 

The junior clerk, in entering a bank, should not be above taking 
outside writing-lessons of a good teacher of penmanship, after he has 
entered upon his banking duties, if he finds that his hand is neither 
satisfactory to himself nor others. Good, practical help may in this 
way be obtained to fill up the deficiencies in his school education. 

Our common and high schools make a great mistake in not giving 
more time and attention to the instruction of their pupils in pen- 
manship. 

Few boys who graduate successfully from our high schools are 
capable of writing a good business letter — even if it be so short and 
simple a one as an application for a situation in a bank. 

But, perhaps, even a better way than taking direct lessons in 
penmanship may be adopted by the bank clerk who is weak in point 



ON PERSONAL MATTERS. 309 

of handwriting. Let him firmly determine that he will practice 
himself into a legible and rapid hand. And plenty of practice, with 
the right aim, will do much towards bringing him up to his ideal 
standard. 

Here are a few hints belonging to these premises. With an aim at 
legibility constantly prominent, follow these simple rules, and leave 
the matter of style and elegance of strokes to occupy a secondary 
position. Cross all the t's, and cross them distinctly and in the right 
place; dot all the i's, and dot them most emphatically in the right 
place. In forming loop letters, have the loops well defined; and in 
making m's, n's and u's, make them so that they may not be taken 
for each other. 

In fact, the secret of forming a legible hand lies in making each 
and every letter in such good form that no one letter can be mistaken 
for another. Learn at once to write without the use of rulings. 
Learn to space correctly — to lay out a letter, or any piece of writing, 
in a good style. 

The faculty of writing rapidly can only be acquired by a good deal 
of practice. But beware of letting the habit of writing rapidly destroy 
the power and habit of writing legibly. 

As an illustration of what I do not consider good handwriting, I 
will mention the modern "angular" penmanship, which is coming 
somewhat into vogue in society in this country and is in some cases 
being carefully taught in schools under the names of English or Gothic 
style. It is of an objectionable type, since it is indistinct. 

A young lady from a first-class school was handed a MS., with 
the request that she prepare a fair copy of it for the printer. The 
transcript she returned looked neat, regular, well spaced and free 
from errors and alterations; but it had one fatal defect. It was 
impossible to read it because it had been written in the Grothic style. 
The most experienced printer would be sure to stumble and growl 
over it. The leading cause of its indistinctness lay in the fact that 
there was not the slightest perceptible difference in the construction of 
the n's, m's and u's. 

Any system of instruction in writing that countenances such a 
method as this should be put aside. 

Manuscript where all the t's are firmly crossed, the i's strongly 
dotted, the n's made distinctly unlike the u's, and the i's not like j's, 
can be deciphered very easily by the printer, though others might 
condemn the hand as homely and not stylish writing. 

I repeat that the first point to be considered in penmanship is 
legibility. 

SIGNATURES. 

The banker is called upon to study many of these. He is also, 

particularly if a bank Cashier, called upon to make many of them. 

The first duty of a person in making a signature is to make it as 



310 PRACTICAL BANKING. 

legible as he possibly can — to make it so that it can be easily and 
quickly read by any and every person who is called upon to make it 
out. 

But this, the first and most important principle in signature- 
forming, is constantly and most emphatically violated by those who 
ought to know better. 

People will write letters, fill up notes and draw checks in a hand 
that can be read ; but the same parties will often sign these documents, 
apparently, with the deliberate intention of making it impossible for 
any but those most intimately acquainted with their hieroglyphics to 
decipher them. 

Some of these manufacturers of occult and obscure signatures 
seem to take a real satisfaction and pride in their productions. There 
are instances where they appear to be the result of long and close 
study of methods of making up what they may claim to be a signature, 
but what is really after all merely an arbitrary arrangement of marks 
they have invented, which have in their results no more resemblance 
to their real written English names than they do to Hebrew or Chinese 
characters. 

Had I space I should here introduce some fac similes of typical 
specimens of autographs of the character I have described, quite a 
number of which are within my immediate reach, accompanying the 
"pictures" with offers of liberal rewards to any person who would 
decipher them. 

There are bankers, as well as business men, who have an idea that 
they can, by "getting up" an odd, obscure and startling signature, 
render forgeries of their names more difficult of accomplishment. 
But this is a great error. These oddities are more liable to forgery, 
more easy of imitation, than is a good plain, square and perfectly 
legible hand. Such a hand will be sure to have delicate charac- 
teristics which will be more likely to prove safeguards against 
successful imitations than will the odd, but broad, features belonging 
to the class of objectionable signatures I have been describing. 

Let every person who knows how to write show this knowledge 
in his signature. 

And let every person who is in any way somewhat unskillful in his 
chirography learn as soon as possible how to write his name, at least 
in a clear manner; for it is a sign that he is likely to be often called 
upon to paint. 

Before closing this subject, let me add a word upon the general 
philosophy of signature-making. 

During the years of my banking experience I have had considerable 
to do with signature-making and signature-reading, and I may be 
able to offer an idea or a suggestion of value and interest. There is 
one point, to begin with, that has always seemed to me curious and 
suggestive. Signatures are, as far as my observation has extended, no 



ON PERSONAL MATTERS. 311 

sort of an indication of the character or characteristics of the writer. 
There used to be a theory about, and I imagine it obtains in some- 
quarters now, that you could tell something of what sort of a man a, 
person was by seeing and examining his signature. But I got that 
notion out of my head, if it was ever in it, long ago. I have seen so> 
many bold, strong, John Hancock-style of signatures, written by 
rather mild men (to put it mildly), and so many little, effeminate,, 
shirking signatures, written by powerful, indomitable hands, that I 
now "take no stock" in the "signature-revelation" theory. 

But all this is not what I was going to say. I have a report to 
make, and practical suggestions to offer. In the first place I have 
been bothered so much by illegible signatures that I clamor in behalf 
of sufferers everywhere for a style of signatures that can be easily 
read. 

Every child attending school should be taught to write his name 
neatly and clearly, without the use of a single fancy line or flourish,, 
and every person should try hard to keep up such a way of affixing 
himself. 

Some, who are very good penmen, persist in doing some one thing 
or another to their signatures which renders them a mystery and a 
terror to all brought in contact with them. A word or two in illustra- 
tion of this. 

I have before me signatures to checks of this style. The name has 
been written fairly well, but the signer has adopted the foolish notion 
that he will be safer against alteration of his check figures if he puts 
them in red ink right over his name. He does this, and spoils his, 
signature without helping in the slightest degree to guard against 
fraud. 

Another has an embossing machine, and stamps the amount over 
his name. Result, no good to anybody. 

Another has the idea that he must get up something unique in the 
way of signature — the idea that safety against forgery lies in such 
uniqueness and oddity ! All nonsense. 

A good, plain, legible signature takes the prize in all directions on 
all points. 

Memorandum: Use good ink; put on plenty of it; learn to use 
pencil, quill or pen, and all sorts of writing implements now in vogue,, 
for you may have to apply them all ; learn to write sitting erect ; learn 
that you must never put your signature to anything in a careless 
manner, either as to the style of the writing, or as to the purpose,, 
word or intent of the signature. That is, consider it an ironclad, a. 
sacred thing, not to be carelessly given or easily forgotten. 

PEN PARALYSIS. 
There has been, off and on, no little excitement among those whose 
lives are very much occupied with the pen, over the pen paralysis; 
question. Without doubt there have been very many instances where 



312 PRACTICAL BANKING. 

persons have suffered from the effects of the long-continued use of 
metallic pens. Some have, for this reason, been obliged to give up 
^writing entirely. 

My attention has been called to this subject by a case which 
recently came up at my own counter. 

When my caller came to sign his name in the place pointed out he 
made his signature with his left hand with a slow and laborious effort, 
.although he had in his previous calls for the same purpose given a 
bold, dashing and rapid autograph with a firm right hand. The 
ielpless, aimless swinging of his right hand and arm, and the sinister 
signature, revealed at once the fact that he had met with a partial 
stroke of paralysis. He was a young, stalwart and active man, and I 
-could not but show a sympathetic surprise over his condition — a 
surprise of an enquiring character — which drew from him the explana- 
tion that considerable writing with that modern instrument of torture, 
the steel pen, had brought upon him a stroke of pen paralysis, or 
^what is often termed scriveners' palsy or writers' cramp. He was a 
gentleman of wealth and culture, and a great traveler. In the con- 
versation we fell into over this unfortunate and rapidly increasing 
complaint, some very interesting light was thrown upon it. I 
iad long given considerable attention to this crippling disease, and 
'was deeply concerned in what he had to say about it. The palsy 
•comes suddenly, often with very slight warning. In the case of one 
"bank Cashier, it seized upon the two forefingers of his right hand at a 
time when he never dreamed of his liability to such a complaint, and 
;at once largely incapacitated him for an occupation which was 
pretty much his sole reliance. The pen dropped at once from his 
ielpless fingers. The saddest thing about this complaint is, that so 
far, the highest authorities have written it down as incurable. Yet 
few sufferers from it are willing to give up in this way. And the 
most of them are nowadays working away under electric and massage 
treatment, believing there is hope for them in these two fields of 
practice. There is little doubt but that help is received by improving 
the general health and by persistent but gentle exercise of the hand 
and arm affected. The disease can in many cases be warded off by 
■certain methods of self management. Among these may confidently 
foe recommended to those persons who are much in slavery to the 
pen, the use of the quill or the pencil upon soft paper, and the 
cultivation of an easy and erect position in writing and easy and 
correct methods of holding the pen. 

Of course, the quill pen, while readily used in correspondence and 
.general manuscript work, and in signing bills and general signature 
work, cannot well be used on books. Every person who has much 
writing to do should, however, learn to make a quill pen, and learn to 
use one. 

But, after weighing all the different theories and hearing a great 



ON PERSONAL MATTERS. 313 

deal said on this matter of pen paralysis, I am inclined to think that 
much of the trouble that comes to sedentary men in the way of 
disabilities of this character arises from general ill-health, want of 
proper exercise in the open air, and the ever-needful special exercise 
of the hands and arms in some kind of work, or gymnastics, which shall 
serve as a counteracting influence upon the effects of the monotonous 
and confining occupations of the desk. 

All persons who are largely occupied in writing should systematically 
and thoroughly exercise the arms in some natural and unstraining 
work. Cutting wood, sawing wood, hoeing, raking and similar arm 
and hand-using labors are to be recommended under this head. 
Walking, riding and driving are pleasant recreative exercises. But 
these do not always call in play the writing muscles of the hand and arm. 
A DEATH IN THE BANK. 

There comes a day when the officer, who may have worked by your 
side for many years, falls by the way. His goings and comings have 
been so regular and machine-like that you hardly counted upon their 
cessation. But some day he fails to present himself at the usual hour, 
at the customary desk, to do the work which has been so long familiar 
to him, and, in his place there reaches the bank a report that he is not 
well. He sends word, perhaps, that he is not very ill; that he takes a 
day or so off for the purpose of recovering his strength, and that he will 
be back at his post soon. But many days slip by, and he does not come. 
By and by, there reaches the bank a report that he is not so well ; 
that, instead of gaining, he is losing, and members of his household 
come to his place of business, and tell of their serious alarm about the 
condition of his health. He has, perhaps, sunk into a fever, or become 
the victim of prostration of some other alarming description. We are 
told that his mind is wandering. In his delirium he talks and thinks 
mainly of his work at the bank; "runs on," about counting money, 
♦adding long columns and making entries. Before the officers of the 
bank, who are more busy than usual, for they are helping on his work, 
have hardly time to call upon him, or to think much about his case, 
the news reaches them that he is dead ; that his bank work is done ; 
that they shall see him no more. As many of them as can go to his 
funeral, carry flowers to rest upon his coffin, and follow him to the 
grave. They visit his family, if he has left one, and endeavor to 
comfort them by bringing up pleasant remembrances of their lost 
fellow-officer, and try to do little kindnesses for these surviving friends 
of his. 

The lessons in practical banking which should be the outcome of 
such occurrences as this to which I am referring — happenings which 
come, alas, so very often — are of an impressive character. 

In view of the fact that those with whom we work — in whose com- 
panionship our business lives are spent — are liable to be so soon placed 
beyond the reach of our good influences, our kind services, our courteous 



314 PRACTICAL BANKING. 

words, and pleasant offices, we should make the most earnest endeavors 
to do all that we can, each and every day, to add to their comfort, 
their happiness and their general advancement and success in life. 

Washington Irving somewhere says, that no thoughtful man can ever 
look upon the face of the dead without wondering that he could ever 
have cherished animosity against the living, who are so soon to be called 
upon to rest in the cold embrace of the grave. And no person will ever 
regret the patience, the forbearance, and the charity which he has 
shown in life towards those who have by death been placed beyond the 
reach of his services and his influence. 

HOMES OF BANK OFFICERS. 

In England, it is so much the custom of the chief bank officers to 
live in the same building with the banks in which they are employed, 
that a standard English work on bank architecture makes just as much 
a point of providing, in its plans for banking buildings, for the rooms 
in which these officers are to live as it does for laying out rooms in 
which they are to do their banking business. 

There are, within the precincts of the Bank of England, residences 
for nine families, which are all occupied by employees of that bank. 

In this country, in our cities and large towns, neither the Managers 
nor any of their officers are often found making their homes under the 
same roofs with their banks. 

Among the smaller banks in the interior it is not an infrequent 
custom for bank Cashiers to occupy, as home quarters, a portion of 
their banking building. 

Or, to state the case as I have the most often observed it, where the 
bank and the Cashier live together, the bank is found occupying a single 
corner room in the house which is the residence of the Cashier and his 
family. 

It would, without doubt, be the better plan, other things being 
equal, for bank officers to live away from their places of business. 

The American idea of separating the man from his shop is the one 
to be chosen in preference to the old English idea of keeping house and 
store under one roof. 

And, in the case of bankers and banking, it is particularly to be 
desired that the man and business should have independent homes and 
independent hours. The profession of which we are treating is apt to 
be absorbing and narrowing in its influence, and the banker who never, 
day or night, gets out of the range and sight of his bank is far more in 
danger of becoming a mental and physical slave to his business than 
he would be if he daily had a chance to put some little distance 
between himself and his vaults, cash and books. 

BANK CLERKS' INVESTMENTS. 

The bank clerk, while he is a bank clerk, should be content to live 
on his salary — should avoid all attempts to extend it by risky specula- 



ON PERSONAL MATTERS. 315 

tions. If he remains a bank officer, he may, if he lives long enough, 
has health, and practices economy, acquire a moderate competence. 

I have, in another place, unsparingly condemned the habit of 
speculating in stocks, as practiced by employees in banks. I have no 
hesitation in saying that the bank clerks of the country, who have been 
working and speculating, during the last decade, would, to-day, be 
better off pecuniarily if, in all this time, they had given their minds, 
during business hours, exclusively to their clerkly duties, put by in 
first-class savings banks all the surplus of their earnings, without 
giving themselves any trouble at all about this matter of personal 
investments, and, out of business hours, devoted themselves to the 
improvement of their minds, and to the recreation and refreshment of 
mind and body. Proof of the correctness of this general verdict majr 
be deduced from careful observations in a narrowed field. 

A bank officer, of the most extensive acquaintance among the men 

of his class, in one of our largest cities, not long ago publicly stated 

that he was perfectly confident that the bank clerks of his city, who 

had been working along, contemporary with him, during the past 20 

years, would be better off than they were to-day if they had simply 

put aside, from month to month, their savings, even in non-interest 

producing safe places, instead of continually struggling, as had been 

their custom, to get large interest for their money, and to increase it 

by speculation. 

BANK SECRETS. 

In these days of regularly published returns of condition and 
periodical examinations by Commissioners, banks have little oppor- 
tunity for keeping their affairs and their situation hid from public 
observation. In the old days of banking in this country there was 
different management from this. There was apt to be thrown an air 
of what may be termed dignified reticence, if not actual mystery, 
about the banks and banking of those periods, which was quite in 
harmony with the fashions in banking in the old country from whick 
we had brought most of the models for our methods and machinery. 
There are bankers now living who can remember when customers of 
the leading old banks of New England always had to take off their 
hats in coming into the august presence of their bank Managers, and 
when these institutions were hedged about by a reserve and formal 
dignity which would astonish a modern bank depositor or paper broker. 
At the period referred to it was the custom to administer to both 
officers and Directors oaths of secrecy and faithfulness which were 
modeled on those in use in London banks. I found the banks of 
London still using the very forms of oaths of office which were once 
in vogue here, but which have, with us, quite gone out of fashion. 
Here are copies of two of these bank oaths (see Forms 74 and 75) which, 
are in use to-day in London banks, the first being the form for Directors- 
and Trustees. While our banks do not to-day exact such a pledge 



316 PRACTICAL BANKING. 

from their officers, every honorable employee will feel bound to 
preserve a proper reticence as to the transactions of his institution : 



Declaration of Secrecy for Directors and Trustees. 

We, the undersigned persons, being respectively the Directors and Honorary 

Directors and Trustees of the public Joint-Stock Company, called , 

do severally declare that we will respectively, faithfully and impartially discharge 
the several duties devolving on us as such Directors as aforesaid, according to 

the deed of settlement of the Company bearing date the day of , and 

any laws and regulations that may be made in pursuance thereof. And we do 
hereby pledge ourselves, and as inviolably as if we had taken our oaths thereto, 
that we will observe the strictest secrecy on the subject of all transactions of 
every description of the Company with their customers for the time being, or 
with any other bodies or persons whatsoever, and on the subject of the accounts 
of all bodies and individuals from time to time having accounts with the said 
Company. 

Dated this — day of , 18 . 



Form 74. 

The second (see Form 75) is the form for the officers : 



Declaration of Secrecy by the Managers and Clerks. 

We, the undersigned persons, being respectively Managers, Accountants, 

Cashiers, Tellers and Clerks of the Banking Company, do severally 

declare that we will respectively, faithfully, honestly and impartially discharge the 
several duties devolving on us as such Managers, Accountants, Cashiers, Tellers 
and Clerks as aforesaid, according to the directions of the Directors of the 
Company and any laws and regulations that may be made by them. And we 
do hereby severally pledge ourselves, and as inviolably as if we had taken our 
oaths thereto, that we will observe the strictest secrecy on the subject of all 
transactions of every description of the Company with their customers for the 
time being, or with any other bodies or persons whatsoever, and on the subject 
of the state of the accounts of all bodies and individuals from time to time 
having accounts with the said Company. 

Dated this day of , 18 . 



Form 75. 
STUDIES AND INTERESTS. 
I might have added to my last section that our bank clerk should 
bear in mind that, in entering upon this occupation or profession, he 
has voluntarily shut the door upon any expectation of accumulating 
great wealth through it. But he should take some comfort in looking 
at the sunny aspects of the business he is following. He is not subject 
to the wearing excitements, the great reverses and general feverishness 
which characterize, in so marked a manner, the career of most modern 
business men. His occupation, if he honors it, and properly attends 
to it, gives him, as far as occupation has an influence in such matters, 
a pleasant social position; for, though it is a lamentable fact that 
some bank officers "amount to very little" outside of their banks, 
there are no good reasons why workers of this class may not be very 
much esteemed as citizens. They have on their hands, as a general 
thing, a deal more of leisure than the average man of business, and 



ON PERSONAL MATTERS. 317 

this leisure, if properly used, may be of incalculable advantage to 
them. By study and reading, by the cultivation of such hobbies as 
philanthropy, art, literature, music, and other innocent pursuits and 
pleasures, they can, if so disposed, make a most profitable disposal of 
their out-of-bank hours. 

I have now in mind many well-known and most successful bankers 
who are as accomplished outside of their banks as in them — bankers 
who are oil painters, artists of various sorts, amateur mechanics, wood 
carvers, botanists, etc. , etc. And they are all the better bankers for 
these reasons. The rest and recreation they get out of their out-of-bank 
hobbies sends them back to bank work in bank hours with minds 
refreshed and strengthened. 

We sometimes hear it urged that bankers, whose days are so much 
given to mental and sedentary work, ought not, in their out-of -business 
hours, to indulge in much of any reading, or study, which requires 
close mental application and deep thought. Light reading is almost 
always recommended as the sort of reading which is altogether the best 
for them to patronize. But it appears to me that in this matter a 
mistake is often made. For some minds which have been wholly taken 
up during business hours with the routine occupation of banking, there 
may be, when the regular labors of the day are over, more real refresh- 
ment, more genuine relaxation, in taking up some quite hard study, 
some line of investigation demanding deep and close application, than 
in the business of half idling over novels and aimless miscellaneous 
reading. Mental health, and mental strength and refreshment, often 
come from the hard work. 

Dr. William Everett said, on one occasion, in an address to young 
men, that when he once found himself sinking into a condition of 
nervous prostration and mental depression, he saved himself and drove 
away the cloud by buckling down to the hardest lines of investigation 
and study that he could turn to. 

The dissipating, weakening effects of too much newspaper reading 
cannot be too strongly pictured. Poring over newspaper after news- 
paper, reading so many things which are not worth reading, in papers 
" which are so like another," and so many accounts of things that 
are not so and which are to be contradicted in the next issue, is neither 
profitable nor refreshing to the wearied mind. 

A distinguished man said in my hearing not long ago that he really 
believed an inordinate fondness for reading was a habit to be feared in 
any well-regulated family. This radical remark was suggested by his 
observations of the time wasted by his sons and daughters in novel and 
newspaper reading. 

I am able to give a direct illustration "from the life," on this point 
of reading and study in leisure hours. 

Happening to observe that a very good young bank officer seemed 
at a loss what to do with some of his tired leisure, I suggested to him, 



318 PRACTICAL BANKING. 

knowing something of his former school tastes and talents, that he 
revive and pursue the study of French and botany — two studies in 
which he had, before the bank swallowed him, taken a deal of interest. 
And it is a pleasant feature of these two pursuits that they lead to an 
in-door and out-door life, which work well together. 

And I must note here that I happen to know a very successful 
banker, who is also a most accomplished and enthusiastic botanist. 
But, to the suggestion in question. The young man adopted my 
recommendation ; and, as I notice the profit and pleasure with which 
he follows up my plan, I can but use him and his work as a text for a 
homily for others. 

As for the matter of the French, what a pity it is that our bank 
clerks, many of whom have been well grounded in it at school, do not, 
in their clerk life, keep it up — take it up and carry it along so far that 
they shall be able to readily read and speak the language. They will 
be likely to find such an accomplishment of great value to them. 
French is the world's language of finance. 

In buying of a Boston banker a letter of credit for a little European 
travel I was about taking, I found that it was entirely written in 
French; and thus our American bankers generally draw them on 
London. 

It is a very pleasant and convenient thing for a bank officer to be 
able to read a French bill if it comes into his hands for collection. 
And, if he ever goes to France, he will feel very much as a deaf and 
dumb man is supposed to feel if, when there, he can not talk French. 

I must not forget to suggest that bank officers must beware of 
letting their outside hobbies interfere with their regular business; 
and, as far as what may be termed sedentary hobbies are concerned, 
they must be taken on with a good admixture of out-door exercise. 

As a brief summary of the foregoing I will say, that the best advice 
I can give to bank clerks is to practice economy, give the strictest 
attention to the work of their profession, read and study, cultivate 
simple, inexpensive habits and tastes, and get all the legitimate comfort 
they can out of their work, and out of the hours outside of work as 
they go along. 

And while following and enjoying this line of life the ambitious 
clerk will also be holding himself in readiness — steadily fitting himself 
as far as possible — for anything better that may turn up. 

Without the possession of a proper and manly ambition a man is 
good for very little anywhere. 

From the ranks of bank officers men have risen to very high positions 
in the general business and financial world. There are plenty of con- 
spicuous illustrations of this point all about us, and there will be many 
more in the future. 



BUSINESS AND PLEASURE. 319 



CHAPTER XX. 

BUSINESS AND PLEASURE. 

Professor Huxley said, some time ago, that he had been reading 
Besant's novel, "All Sorts and Conditions of Men," and that he had 
found it one of the most entertaining books he had ever read. What- 
ever may be his or others' opinion of this story, there is in it one 
character most strikingly interesting to any one who has for a moment 
considered what is to be deemed the most unattractive tendency of 
service in subordinate positions in banks, other corporations, Govern- 
ment departments, and the like. This is the tendency towards 
stagnation — mental and even physical — a drift, not in the direction of 
improvement, growth, enlargement, but towards contraction, shrink- 
age and decline. 

In the character in the novel in question — that of Brother Josephus — 
we have a man who, from a very long occupancy of an humble, 
subordinate position, where his labor was of the most simple routine 
character, demanding of him little exertion, either mental or physical 
— the same thing over and over again every day — done without the 
exercise of a particle of hope or ambition for better things, finally 
sinks into a condition well-nigh bordering upon imbecility; and when, 
at last, by accident, better things are offered him — a higher situation 
thrown open to him — he finds himself utterly unfit for the work — 
entirely unable to cope with the duties of the new position. 

It does not demand any very wide experience with banks and 
banking to enable one to recall many instances of clerk life and 
manners which painfully remind one of the story of Brother Josephus. 

There are many officers in banks to-day, good and faithful men, 
who have not advanced an inch since they first entered there long 
years ago, and who have, in all the time of their service, evinced no 
particular ambition to qualify themselves for higher and better things 
by studying into any matters even a small degree without the line of 
their special and subordinate duties. And when there has sometimes 
come to such rusty and stagnant workers opportunities for promotion, 
they have shrunk back and declined the advancement, feeling no sort 
of confidence in their ability to fill the better places. I have known 
instances where such men have made feeble attempts to take on a 
higher range of work, and then given up the trial and returned to their 
old positions. 

The illustrations — the instances — of rust in banking which I have 



320 PRACTICAL BANKING. 

given are, of course, extreme cases ; but the rust exists, and these cases 

serve well to point my moral. Now, what are some of the causes of 

this rust in clerks ? 

RUST IN CLERKS. 

In the discussion of this point, I now confine myself, as is natural 
in this place, to the consideration of bank work. But every one must 
fully understand that work of many other kinds has the same rusting 
effect as that of clerking in banking institutions. Department clerks, 
and those in general business service, are often found falling into 
sluggish routine ways of life and action. The daily performance of 
the same, or nearly the same, class of duties, month in and month out, 
year after year, must, in the first place, almost inevitably tend to this 
result. The work may be confining, wearisome — wearing, from its very 
monotony ; yet, in time, it becomes a comparatively easy and machine- 
like task, requiring for its passable performance very little mental 
exertion. Mind is, in many points, very like muscle. Disuse of either 
is weakening in its results. As the bank officer may, after long exper- 
ience, plod through his daily routine of work without much real 
exertion of the mind, because he has such long experience, it follows, 
of course, that his mind in time loses somewhat of its vigor, force and 
elasticity. Real, forcible, and most vigorous exercise is as necessary to 
the best health and development of the mind as it is to that of the body. 

Another phase of the deterioration in question is shown in the fact 
that bank officers, long in one subordinate position of the character I 
have described, become, in time, quite in the habit of doing even their 
familiar routine work less skillfully and effectively than those with no 
better natural capacity who are fresh workers in such places. 

Another source of the difficulty we are describing is found in the 
fact that long and constant subordination to the will, judgment and 
discretion of others is almost sure to have a narrowing, weakening, 
and contracting effect upon the mind. From the very nature of their 
positions the Bank Teller, Book-keeper, etc., are seldom called upon to 
settle anything in the way of general business matters except their 
figures and their cash. They are greatly in danger of becoming machine- 
like in their ways and methods. The tendency I have here described 
is a very unfortunate one — is one of the shady features of the business 
we are considering. But it is a tendency that can be very largely 
counteracted — hedged against — by the proper management of the 
individual. 

The monotony of the banking business, or of the work and business 
of any other occupation or profession, becomes painfully burdensome, 
and is greatly deepened, by the habit of allowing the mind to sink into 
what might be termed a monotonous view of one's environments and 
daily duties. By sturdy resolution and a cultivation of a habit of 
mental self-management, much may be done to hedge against and 
ward off those unhealthy and most depressing habits of thought which 



BUSINESS AND PLEASURE. 321 

characterize many sedentary workers in such routine positions as those 1 
held by bank officers and many other classes of office and shop- 
laborers. Let such dull and desponding ones, who are complainings 
that their existence presents no variety of scene and work, and that, 
their days are but a series of monotonous periods of labor, bear in 
mind that in this life no two days can by any possibility be precisely- 
alike. Instead of giving way to a kind of discontented-pendulum 
feeling about the future of their day's work, let them take the view- 
that only one day at a time is to be taken care of — to be properly- 
lived — and that each single day is best viewed when it is looked upon. 
as a completed existence in itself, and as a sort of well-rounded circle 
of life and labors very like the entire life span of man. There is a. 
remarkable similitude between the single day and the completed life. 
The morning is like the birth of the individual; the high hour of the 
day, with its activities, like the prime of life ; the decline of the day 
like old age ; then comes sleep, which is a brother to death. 

It is quite likely that this desponding view of their business life- 
succeeds an energetic and wholly different period. Some managers 
and clerks who have served long and faithfully in the routine paths of 
banking, by their industry and skill placing the business under their 
charge in such perfect and systematic running order that it has finally 
attained a machine-like perfection of movement, when that point has 
been reached fall into an indifference and loss of vital interest in their 
professional work. Assured of their position and the fair success of 
the institution, they grow inclined to let what they deem well-enough, 
alone, and become anti-progressive, old-fashioned and unenterprising. 
A hint in time of the dangers lurking in their ways of life and work 
may be of no little value. They should be given to understand that 
they cannot stand still in this life either in business or in social spheres 
of action and must keep fully abreast of the times or be in critical 
danger of falling behind in the lively race in which they are pretending 
to take a part. Every one of their business days should be characterized 
by alertness in seeking out new methods and applying improved 
machinery in the administration of their business. They should con- 
tinue to be, as business men, active and practical students in their 
special departments of financing. 

And yet, admitting that the bulk of the daily routine labors of the 
banker, when viewed from a pessimistic stand-point, must seem to be 
of an absolutely drudge-like character, even labor that is uninviting- 
in its sameness may have its value from its regularity and necessity. 
And this remark may with truth be applied to the greater part of the 
labor which devolves upon any professional man. The lawyer and the 
platform or pulpit orator have brief hours of enjoyment of the more 
brilliant and conspicuous work of their callings, but the major part of 
their lives and strength must be spent in monotonous and severe toil 
in the study, the office, in the committee-room and at the desk. Yet 



-•322 PRACTICAL BANKING. 

the matter in view has a wiser and healthier aspect when looked at in 
a truly philosophical manner. Regular and absorbing daily occupation 
of mind and body under proper conditions and circumstances is an 
unspeakable blessing to man. The worker in a bank, either as an 
.humble subordinate or chief Manager, ought to be thankful that it is 
his lot to be daily summoned to his office and desk for the purpose of 
fulfilling his share of the task of work, which is the natural inheritance 
■of the race. The call to duty drags him out of himself — out of that 
natural tendency of the human mind to sink into stagnation and morbid 
conditions of self -consciousness ; and, as like an intelligent machine he 
goes through the seemingly dull round of his daily duties he really fills 
a natural sphere of action and helps himself when he feels he is but 
laboring for others — f or a subsistence, it may be, for those dependent 
upon him. Such is the constitution of our minds and bodies that it is 
argued with force by the wisest thinkers that the human race would 
«ink into such a morbid state of self -consciousness, if it were not for 
.their absorption by what are termed the petty labors and cares of life, 
.that melancholia, insanity and suicide would be the result. A wise 
rbanker has said : ' ' The every-day cares and duties, which men call 
» drudgery, are the weights and counterpoises of the clock of time, giving 
its pendulum a true vibration and its hands a regular motion. " In view 
of these facts, bank workers should study to acquire the habit of taking 
the most cheerful view of what are termed the shady aspects of their 
work — the cares, responsibilities and confinement incident to their 
profession. 

Not long ago a bank officer who was ill, not from any organic 
-disease, but from a mysterious nervous prostration, accompanied by 
great depression of spirits, and who had been morbidly secluding him- 
self at home under the care of two young doctors, who had seen him 
daily sinking lower and lower in vitality and courage, was told by one 
of our most eminent physicians, who had made cases like his a spec- 
ialty, to plunge out of his house — out of himself — and go regularly to 
business even if he had to drag himself there by holding on to the iron 
pickets of the street fences. The man went to work, and, owing to the 
companionship and absorption incident thereto, became a strong and 
healthy person. 

In view of what I have just said relative to the advantages accruing 
to both mind and body from the pursuit of some regular, and, as it 
were, bread-winning daily occupation, the reader will readily conclude 
that I am not in favor of an early abandonment of business, either 
banking or mercantile, by men who have been wedded to the habit of 
daily work, and who are not mentally or physically incapacitated from 
its further pursuit. 

I have observed that those bankers and merchants who have 
thrown off the harness under the circumstances I have just described 
have, in a majority of cases, regretted the change they made, and, in 



BUSINESS AND PLEASURE. 323 

very many instances, rapidly grown old, feeble, listless and stagnant, 
while their contemporaries, who have perhaps been forced by the 
pinches of poverty to keep at the helm of trade and finance, have kept 
themselves mentally and bodily as bright and active as crickets. 

I have known of cases where men in banks who have worked 
themselves up by long and successful service to high and lucrative 
positions, and finally resigned to gratify a dream of idleness, have at 
last gladly availed themselves of opportunities to go to work again, 
even in subordinate positions, mainly for the sake of having some- 
thing to do for a portion of the day. 

I have also in mind at this moment the case of a most successful 
financier, who gave up business in the prime of life for the sake of 
enjoying in leisure and travel the large wealth he had accumulated. 
After three years of "still life" he plunged again heartily into the 
thickest of the fight, saying to me, "I have found that I could not 
enjoy reading Shakspeare all the time." 

We recur to our point of guarding against "rust " and repeat that 
every bank officer should study how best to keep himself alive. 
Promotion, or the hope of promotion, cannot be an influence in this 
matter with all, for many of the best bank officers may be doomed to 
labor on in the same line of work through long years. But promotion 
is not everything. Every bank officer should make the best and the 
most of the place in which his fines are cast, believing that, in some 
points, it has advantages over the higher place he may be thinking 
about. He should not fail of doing everything that conies in his line 
of duties in the very best manner possible. 

William Gray, the famous merchant, the first President of the State 
Bank, of Boston, was once accused of having been a drummer when a 
young man. His only reply was, "Did I not drum well ?" 

No matter how humble the work of your particular office may seem 
to be, do it in the best manner. And, at the same time, endeavor to 
learn all there is to be learned about the banking profession. Gret the 
widest and broadest knowledge of the whole business. And, if 
promotion does not happen to come, you will win the respect of 
others, your own self-respect, and keep at a distance the blight of rust 
and stagnation. 

Much help in the way of avoiding a tendency to experiencing the 
insidious effects of routine work and business life may be obtained by a 
profitable use of all out-of-bank hours in employments that shall both 
strengthen the mind and body — in studying and out-of-door exercise. 

A great secret of true living is to have many interests — to let the 
daily way of life touch, as it were, upon as large a variety of conditions 
and situations as is practicable and consistent with a proper discharge 
of the individual duties and responsibilities of the particular occupation 
which is supposed to be the leading business of every person. 

The profession of banking naturally tends towards the complete 



324 PRACTICAL BANKING. 

absorption in it of the person who follows it. But this entire absorption 
is both unsatisfying and unprofitable. That bank officer is the best 
and most successful worker in banking, other things being equal, who 
is the most of a man outside of this narrowing business of ciphering 
and counting, recording and computing, and managing and financiering. 
If he has the happy faculty of completely casting behind him, when he 
shuts his cash books and his vaults, his shop-thoughts and shop-ways, 
and of plunging freshly into matters and things which are of the right 
sort, yet of precisely the opposite character to those which have 
absorbed and enslaved him during his morning hours of business, he 
will be the more successful as a business worker for such a habit — will 
come back to his desk twice the man for the refreshment he has 
obtained in the way we have indicated. 

Resolution to live and move in this way will help a man immensely 
in his work of self-government in the premises. 

Let the banker determine that he will be something more than a 
bank machine. Let him, when out of the harness of the tread-mill, 
cease to keep up the tread-mill gait, and, plunging, as one plunges into 
a bath, into an atmosphere as unbusiness-like as possible, restore to 
activity those mental and physical powers which are never called into 
action in his routine occupations and which as a consequence, would 
otherwise become rusty and stagnant. 

HABITS OF STUDY. 

People who are not willing to listen, to ask questions, to enquire 
into things, to learn of anybody who has some sort of valuable knowl- 
edge which they do not have, will not become the most intelligent 
people in the world. The fact is, no one man can know everything. 
There is no man so humble and so unlearned that he cannot, if an 
opportunity is given him, teach a person some valuable thing which it 
would be difficult for him to learn elsewhere. 

Sir Walter Scott built up those magnificent novels of his very 
largely out of material he had gathered from conversations with the old 
men and women of the Scotch peasant class, among whom he had so 
long walked and talked. 

Williain H. Seward's biographer tells us, that Mr. Seward always 
held that he could learn something valuable from every man he was 
thrown in contact with. And Mr. Seward knew well how to do this. 
He had, to a wonderful degree, the art of putting himself into easy 
and companionable relations with all classes. 

But next best, says some one, to the study of men, is the study of 
books. And the most valuable books for any young man's study-table 
are not books of a general — a miscellaneous— character, but reference 
books. 

Every young man who is anxious to become usefully intelligent — 
really well-educated — should resolve himself into an animated interro- 
gation point. Whenever in his casual readings of newspapers, 



BUSINESS AND PLEASURE. 325 

magazines and general literature, he meets with allusions and refer- 
ences which he does not fully understand, or whenever, in mingling 
with men, he has questions suggested to his mind which he cannot 
answer, he should not give himself rest in the premises till he has 
solved the points over which he has stumbled. As an aid in this 
work of investigation, a good reference library is invaluable. Our 
imaginary enquirer should surround himself with just as many well- 
selected reference books as he can afford to buy — reference books of 
the character of encyclopedias, dictionaries, volumes of maps, manuals 
of geography, history and biography. 

Persons living in large cities, where great libraries abound, may not 
be in such need of reference books of their own as are those who live 
away from the centres of intelligence and population. Still, it is a 
great comfort for the student, in city or country, to have such books 
as I have described right at his elbow — to own them himself. 

I have thought, while cogitating over the points advanced in this 
paragraph, that I should like to be near, and have the full service of, 
the novel office described in the following curious advertisement from 
a late London ' ' Times " : 

THE UNIVERSAL KNOWLEDGE AND INFORMATION OFFICE, REGIS- 
istered, 19 Southampton-street, Bloomsbury-square, W. C. Every single question 
on any subject and in any language is charged Is. The charge for an inquiry which 
is not a simple question, but which involves many questions, or which may require 
much labor and time, can be ascertained beforehand or left to the Management. 
Prospectuses on application to H. Fisher, Esq. 

BANKERS' INSTITUTES, 
or bankers' and bank officers' mutual improvement societies, ought to 
be set up in every city or large town having a sufficient number of 
persons interested in banking and general financial matters to man 
such an institution. 

Every young man who enters as a worker in a bank needs an 
opportunity to learn, as soon as he possibly can, all there is to be learned 
about the business he is to follow as a profession. 

A great advantage for such a student is the possession by his bank 
of a well-selected banker's library — a good stock of standard books 
upon the subject of banking and general finance. And every bank 
should also subscribe liberally for the best banking periodicals ; they 
are sure to contain much matter of fresh and living interest to the 
inquiring bank officer; and they should not only be taken in — they 
should be carefully studied. But, in the matter of libraries for the 
banker, there is an arrangement which I noticed in London, Liverpool, 
New Castle, Birmingham, etc. , which cannot but commend itself fully 
to all city bankers and business men this side of the water. There have 
been established in the heart of these great English towns magnificent 
public reference libraries — libraries supplied in a most exhaustive 
manner with every class of reference books likely to be consulted by 
business men, and under the superintendence of librarians who are- in 



326 PRACTICAL BANKING. 

themselves walking libraries, and who are ready to be questioned at all 
times. Live bank officers are continually striking points where further 
light is wanted to satisfy them ; and were one of these splendidly 
equipped reference libraries right at hand, they would often work them. 

Another excellent aid for the progressive and studious junior, is an 
opportunity of becoming a member of an organization such as I have 
named in my title to this section — an organization whose objects should 
be the holding of stated meetings for the most practical discussions of 
the theory and practice of banking, and for the purpose of considering 
and maturing plans for the general advancement of the interest of the 
banking guild. 

The secondary advantages of societies of the type suggested would 
be of a very attractive character; and among the most prominent of 
these would be the social pleasures and privileges which would be a 
very legitimate adjunct of these organizations. 

While in London, I had opportunities of becoming acquainted with 
its nourishing Bankers' Institute. We ought to have here institutes of 
just about the same class in all our Clearing-House cities. 

In 1850, the clerks of the Bank of England formed themselves into 
a banker's literary association. The Directors of the bank gave them 
at once several hundred pounds and a library, and also assigned, for 
the use of the association, rooms in the bank. 

The great banking men of London are quite apt to be good talkers 
and writers upon banking and finance. 

Mr. Gilbart, the late Chairman of the London & Westminister 
Bank, was an active member of a debating society of which Macaulay 
and Mill were members. 

OTHER OUTSIDE HABITS AND ASSOCIATIONS. 

As bank officers spend their days and their strength in positions of 
large responsibilities — in taking care of other people's money — it is, of 
course, expected of them that they shall conduct themselves in a cir- 
cumspect manner, both in and out of the banks, which are their 
business homes. They should be careful about the company they 
keep in their out-of -business hours, and the character of the amusements 
and general recreative pursuits which they patronize. 

Yet it is by no means desirable that they should be so under the 
harrow of the profession of banking, which they follow, as to be 
unable to throw off all thought of it, and all talk about it, when once 
they have shut their ledgers and their offices. 

,In order to the attainment of the most perfect freedom from those 
banking cares which are apt, in so many cases, to make the bank 
officer's after-business hours but periods of weariness and depression, 
it is well for him to cultivate an out-of -bank life, as far as occupations 
and associations are concerned, as entirely unlike that of his business 
hours as is possible. 

As his inside daily life is of necessity one of a sedentary and confined 



BUSINESS AND PLEASURE. 327 

character, and involving considerable mental strain, it follows that the 
best outside life for him is that which brings him into the open air and 
keeps him out of sedentary and mental occupations. Long walks, 
gardening, chopping wood, riding and driving are better for him than 
chess, cards, late hours at places of amusement, balls, or parties. 

That banker is certainly getting into bad ways, as far as his thoughts 
and environments are concerned, who can only heartily welcome as 
out-of -business companions those who can prolong his business hours 
and ways by talking to him about rates per cent. , the general condition 
of trade and finance, and the prospects and retrospects of the banking 
business. 

The level-headed and thoroughly competent banker gives undivided 
attention to his business during business hours, and in out-of-business 
hours is quite likely to make a daily practice of spending some little 
time in studies which are in the direction of his profession. But beyond 
this he gives his time and energies, if he is a wise man, to pursuits,, 
hobbies, associations and recreations as foreign to business as possible,, 
and will politely shun the person who threatens to carry him back by- 
talk of interest, stocks and bonds, to that banking business which he 
is trying to be ready for on the morrow. 

He should not forget to reap all the practicable advantage that 
comes from social enjoyments, and endeavor to be a good citizen and 
neighbor as well as a good banker ; but there are limits to be set up, 
for his strength must be husbanded. He can discharge his political 
duties, yet it is not necessary that he should plunge into politics. He- 
can do his share of work in religious, social and educational matters, yet 
it is not absolutely necessary that a bank Cashier should try to run a. 
Sunday-school, a church with all its week-day evening meetings, or 
serve as chairman of a School committee or as a member of the Board 
of Selectmen or Aldermen. Bank officers have broken down under the 
attempt to be very prominent in public work and at the same time 
do faithful work at the bank ; and there are bank officers who have 
neglected the interests of the bank in trying to do too much outside 
work. 

I have mentioned particularly the ' ' after-business " hours, but the 
time in the morning, before business, is a part of the day which may 
be made very valuable as a time for work and exercise. And the work 
in question will generally all be done before breakfast, since it is well 
for the clerk to put his breakfast hour as late as he can without making 
himself late at the bank. The weight and brunt of his daily labor 
must come between his breakfast and dinner, and he must put these 
two meals as near together as he can. 

I am now speaking of the situation, which is almost universal in 
banks, where the officers cannot get their dinners until after bank hours. 

Bank clerks should avoid late hours, and rise early. Sleep in the 
first portion of the night is quite generally held to be particularly 



328 PRACTICAL BANKING. 

refreshing. And, by rising early, the bank officer may be able to take 

a little physical exercise and do a little profitable studying and reading 

before he takes his breakfast. Both the mental and physical work 

"will help to improve his appetite for his morning meal; and, if he has 

a, good appetite for his breakfast and eats a substantial one, it will of 

course stand by him well during the long strain of the forenoon at the 

bank. 

THE VACATION. 

An experienced and successful bank officer said that he believed in 
taking a vacation every day, and had succeeded in doing so. These 
daily vacations he did not propose to push into the place of an annual 
long vacation, for he also believed in and took his regular two weeks' 
iurlough. 

His statement was only his way of stating the ideas which I have 
"been trying to impress upon my readers. The banker who does not 
succeed in cultivating the habit of daily throwing off banking — and by 
proper thought and discipline almost any man can do this when not 
ill — will break down early and find himself obliged to take a long 
vacation. 

It is generally believed, and there are good grounds for it, that not 
•only the bankers but most business men of this country are more prone 
to become completely absorbed in their regular occupations than those 
of the great European centres, who are very successful in their 
■attempts to throw off the shop when out of it. They know better 
than the bankers of this country how to live a daily dual life in 
.availing themselves of a vacation every day. 

But a word in reference to the annual and actual vacation is what 
I have in mind. 

The bank officer's first duty when his vacation time comes is to cut 
entirely loose from the bank and go away somewhere. He should 
carry out a programme that will change his general way of life not 
only in regard to the hours he has been in the habit of giving to work, 
but the time spent at home out of the bank. He should endeavor to 
obtain complete change of scene, of air, of surroundings, of compan- 
ionship and of occupation. In order to obtain all these there is no 
necessity to make any great exertion or spend large sums of money. 
The bank officer whose life is passed in the city, should seek rest and 
recreation in the country or the sea shore at a season when those 
localities are likely to be particularly attractive. The officer of a 
country bank may find it pleasant and profitable to take a vacation at 
a season of the year when the great city is the most attractive to a man 
at leisure, and he may find it pleasant to spend his fortnight in 
' ' doing " the leading sights of the metropolis and mingling in the rush 
and whirl of a life which is to him a novelty and an inspiration. A 
bank officer's life and work is mainly of a sedentary and mind- wearing 
..character. He should at all times bear in mind that what he needs 



BUSINESS AND PLEASURE. 329 

most during his absence is out-of-door life and freedom from mental 
labor. 

There are bank clerks who have been in the habit of spending their 
yearly two weeks' vacation in getting on express trains during mid- 
summer and going like mad as fast and as far as possible without any 
special regard to the direction or attraction of their route. They have 
generally returned to their desks the worse for their " rest " from bank 
work. A certain amount of car riding is often a necessity in order to 
get to a change of scene, but the traveling part, where steam cars have 
to be used in hot weather, should be deemed only a necessary evil and 
made as short as practicable. In New England during spring and 
autumn a journey by horse, either by wagon or in the saddle, is delight- 
ful, but in hot weather they should be carefully avoided as something 
painful and unrefreshing either to mind or body. Trips by water in 
summer are delightful to people who are fond of the sea, but those who 
are not and those who are subject to sea sickness should carefully shun 
steamers and yachts. Most bank officers have families. Those so 
situated can hardly do better, during a summer vacation, than take 
their families into some pleasant rural region which does not waste 
money and time to get there and back in hot and dusty trains, where 
in green fields and under pleasant skies, with new surroundings, the 
short furlough may be made to glide by like a pleasant dream. 



PRACTICAL BANKING. 



CHAPTER XXI. 

BONDS OF SURETYSHIP. 

All bank officers give bonds. The custom of so doing originated on 
the other side of the water. But why they should so universally be 
required to do this, while clerks who work for individual employers are 
just as universally exempt from bond-giving, is a matter not quite clear 
to most minds. In both eases the men are liable to occupy very 
responsible positions, and to have in charge the interests and property 
of others. 

In the case of bank officers, the property in their hands is that of 
the shareholders of the bank. 

The clerk for private parties takes charge of the money of his 
individual employer, who may be even more disastrously affected by 
any breach of trust on the part of his clerk than is the individual 
shareholder in the bank. 

And there are many cases where the business clerk may, by a defalca- 
tion, spread distress and ruin over just as wide a field as that which is 
apt to be disturbed by the irregularity of a bank officer. 

And, after all, I ought to state here that it is quite common in 
London and other English cities for merchants to require from their 
clerks security for the faithful discharge of the duties of their positions. 
And in some instances, though rarely, this practice has been followed 
here. 

On receiving a notification of his appointment, our bank officer is 
informed that he will be expected to secure at once bonds to the amount 
of a sum named, signed in a responsible manner. And the sum named 
depends upon the rank of the position assumed, and upon the salary 
attached thereto. 

At least this is supposed to be the system upon which this matter 
is arranged, though I have known instances where banks have set up 
rules regarding bond-taking which seemed quite out of harmony with 
their customs in regulating salaries and responsibilities. 

The bonds of bank officers generally range all the way from the 
thousand or two of the Messenger or extremely junior under-clerk, to 
the thirty or forty thousand dollars of the Cashier. 

Presidents give no bonds. I have heard it argued quite vigorously 
that these officers should do so. 

The form given on the following page (see Form 76) is an illus- 
tration of one in general use in banking institutions. It is that 



BONDS OF SURETYSHIP. 331 

of a bank officer's bond— the chief points, with the legal repetitions 
eliminated : 



Know all Men by these Presents, 

That we, s^o^uuudl W JvjJLilj as principal, and JLju^ju*. q£ju>JJJv 

<x-^JL ^Cjla^ajj. ^LgJvjooAj&_a^ as sureties, are holden and stand firmly 

bound unto 

The Rhodes National Bank, of New York, 

in the SUm of^r^rrr^r^rr^rrr^^iO j<,ui-> <3ivj0^jL^>OLJO^rrr^TrrnrrTrr^rrrrr^rrrdollarS 

to be paid unto the said. \Jx_j6_A-a_A, JS^jtAjo^A^oJl QcijxjoJtL — . 

Whereas, the said.. <s&jx-*ajuu<sA rCJLJJLu-> .has been duly appointed 

to the office of "6o<x-jaJ>-xjla. .of the bank aforesaid, by the Directors 

thereof, and has signified his acceptance of the said appointment : 

Now the condition of this Obligation is such, That if the said 

<s£uxjk*»..Axjdl v\ ivjoLa-; shall faithfully discharge the duties of his said office 

and all other duties that are, or may hereafter be, prescribed by the President 
and Directors, for and during the term for which he has been so elected, and 
for and during such term of time as he may continue therein, by any re-election 
or otherwise, then this obligation shall be void, but otherwise shall -emain in full force. 

It is, however, understood, that in case of the death of either of the above- 
named sureties, or in case either of the above-named sureties shall at any time 
give notice in writing, to the President or Directors, for the time being that he 
does not wish to be held any longer responsible on this obligation, thereupon 
both of the above-named sureties shall be discharged from liability on account 
of any default of the said principal which may occur after thirty days from and 
after the notice of such death, or of such wish to be discharged as aforesaid. 

Signed and sealed in presence of 

4c^-AXJ!_! TAfivJjtiL..-(SEAI,.) 

c^ju^xjUk. Q&juuJJdb (Seal.) 

d\JU^JyjuL ^CLi>^A J 4oGLj^(SEAIi.) 



TAflJULLouu*. C^gJL 



Witnesses : -j WjLJULLcuu*. Gu^Aj^. 



Form 76. 
"WELL AND FAITHFULLY." 

An expression which embodies the central point in the form of 
fidelity bonds most in use in banks is one over which there have been 
many lively debates and many sharp legal contests in courts in various 
States, with varying results — decisions of many hues. Without entering 
into an exhaustive legal discussion of this point of the rights and 
responsibilities of banks and their employees under bonds which 
guarantee officers in the phraseology we have quoted above, a few 
practical reflections and suggestions germain to the matter are in order. 

These bonds are, primarily, guarantees — insurance of the officer's 
honesty. And yet, no one can question that they cover other contin- 
gencies. They may be held to insure the employer against the careless- 
ness, the thoughtlessness or the willful neglect of the bonded employee. 



332 PRACTICAL BANKING. 

But any attempt to fasten upon the bond other responsibility than this 
is sure to open up questions that must, when in dispute, be referred to 
courts — to juries and to judges. 

It has been claimed that this guarantee, that an officer's duties shall 
be performed "well", holds the signers of such a bond responsible for 
losses that may come from an officer's want of skill — his dullness and 
stupidity. But it would seem possible that the employer — the bank- 
ought to be somewhat responsible in these regards. It ought to know, 
when it selects an officer, whether or not he has natural fitness for the 
work it is to give him — whether his abilities are equal to the task it sets 
before him. And the bank, which has better opportunities than the 
bondsmen for judging in these matters, should make the most strenuous 
endeavors to start right in the selection of its clerks, and should be 
quick to move in the matter of correcting any mistakes it may have 
made in making up its staff, by retiring unsuitable men. 

In a celebrated legal contest, covering this point, it was finally held 
that a bank officer who did his work as well and faithfully as he knew 
how had lived up to the letter and spirit of his bond, blunders and 
consequent losses to the contrary notwithstanding. 

There is another item of considerable interest belonging to this 
bond question. 

To make errors is a part of the system of banking, if I may so express 
myself. That mistakes must occur in running the machinery and 
working the methods of the best regulated banks is a fact that must 
l>e discounted. An able, skillful, honest and faithful bank officer can- 
not be expected by his bank, nor can he himself hope, to run along in 
any leading and highly responsible position in a bank — say like that of 
a Paying-Teller for illustration — year after year without making errors 
which entail loss of money. 

It is for common sense and common law to say what sort of a 
division of the risk of a business of this kind shall be made between 
employer and employee, and what service and how many errors are in 
any given circumstances consistent with the faithful discharge of duties. 

"AND SUCH OTHER DUTIES AS MAY BE PRESCRIBED." 
This is another expression in very general use in bank officers' bonds 
— an expression intended to hold the signers thereof fully responsible 
ior the bonded man's faithful discharge of whatever duties may be 
assigned to him by the bank which has retained him and specially 
bonded him for a particular office. 

In the current workings of a bank, especially where the institution 
is a large one, with many departments and many clerks, it is inevitable 
that there should, from time to time, be more or less shifting of men 
and changing of works. Vacations, sickness, stress of work in some 
departments, and current light work in others, demand these transfers. 
And the wording in the bond, to which we have called attention, was 
intended to cover the risks incident upon these changes — to gr arantee 



BONDS OF SURETYSHIP. 333 

that the officer bonded — for instance, as a Teller — should also be 
under the same guarantee if temporarily transferred to discount work. 

But it should be fully understood by banks and their employees 
that there are well-defined limits to the extent to which this very 
general guarantee can be extended. The expression in question has 
been passed upon by courts, and the decisions which have been 
reached, and which would seem to be entirely in harmony with 
common law and common sense, are to the effect that the bond will 
only hold when the extra work — the work other than that for which the 
officer has been retained — is of a character not inconsistent with those 
duties in which he is regularly employed — not out of the line of work 
to which he is accustomed, and which he has been particularly hired 
to discharge. 

It cannot, for illustration, be supposed for a moment that bank 
Directors could, under this clause, with bond safety, direct a Messenger, 
entirely unused to the Paying-Teller's duties, to take charge of a 
Paying-Teller's department. 

There is another bond-point of value which deserves particular 
notice. Banks are pretty sure to lose their hold upon signers of 
officers' bonds, if their Directors misuse, mismanage, and, in a general 
manner, misdirect the bank in their charge. There have been several 
suits at law, in bank-wrecking cases, where this has been made evident. 

CARE OF THE BONDS. 

After a bank has accepted an officer's bonds, they are filed away, 
against a time of demand for them and should be in charge of the 
President or the Board of Directors of the bank, and in a secure place. 
At least once a year, a committee of the Board should go over these 
bonds, making a careful examination of them, and should make a 
report of the results of this examination to the full Board. This report 
should be made in a formal manner, and entered on the Director's 
record. 

I have known of many very surprising instances of neglect in attend- 
ing to this matter of supervising the life of bank officers' bonds. The 
most notable cases of this sort have been made prominent in instances 
where banks have failed and passed into the hands of Receivers, who 
have sometimes discovered the officers' bonds to be of very little value, 
because their signers were mostly persons who had failed or died long 
ago, or who had never been financially responsible. 

WHICH ARE THE BEST BONDS? 
There are few points of more vital interest to bank officers and 
bank owners than those which relate to the comparative value of the 
bonds of bank officers which are furnished by the Fidelity Insurance 
Companies and by individual signers of bank officers' bonds. Although 
the merits and demerits of these two systems of bond-giving are just 
now being discussed quite earnestly in National bank circles, and the 



334 PRACTICAL BANKING. 

company insurance-system is coming more and more into vogue, there 
seems no immediate prospect of the entire abandonment of the old- 
fashioned way of bond-giving — that of furnishing as hostages an 
employee's best friends. There are to-day on the bonds of bank 
officers of New England, if not of those in all quarters of this country, 
far more individual sureties than those of guarantee companies. 

On behalf of the security supplied by the guarantee companies 
there are many very strong arguments to be urged. I have only the 
space to point out a few of these, and, as I do this, I propose to weigh 
them impartially. 

It is said that it has always proved very difficult to collect individual 
bonds, where default of the principal has led banks to levy upon them, 
and that, in a vast number of cases of defalcation, the banks have 
completely failed in their attempts to realize upon these individual 
bonds. I readily allow that this has been the case, but these failures 
have often been the result of carelessness upon the part of the banks 
in not renewing bonds of officers when they have changed their posi- 
tions in the banks, or in not exercising due care relative to these 
securities in some other points. 

It should also be borne in mind in this connection that banks will 
find it no easy task to collect a bond of a guarantee company if that 
company has been legally released by the negligence of the bank ; and 
it should also be still further borne in mind that it does not always follow 
that a guarantee company will in every instance prove in the end a 
better debtor on a bond than an individual ; for in these days corpora- 
tions collapse as well as individuals. 

Another important point in favor of the methods and management 
of the guarantee companies, and one which is not always alluded to in 
discussing the matter in question is, that guarantee companies not only 
aim to fully assure themselves at the start of the worthy character of 
the men they insure and will not insure a man unless they are quite 
confident they know all about him, but they follow him up. They 
institute a watch over the way and walk of the men upon whom they 
have taken risks. And if by this justifiable supervision — espionage, if 
we may be permitted to so term it— they find that a man is unworthy of 
their confidence — a bad risk — they will stop insuring him and withdraw 
their policies. And such a withdrawal is equivalent, of course, to a note 
of warning to the employers — a note of warning which may often be of 
very great value. 

It must certainly be acknowledged that the individual signer of a 
bank officer's bonds has quite often very infrequent opportunities of 
watching the business and private career of his man. Let us hope that 
he will seldom find need of doing this. 

And there is still another point to be scored in favor of the standard 
guarantee companies in this country and in Europe. They have from 
the first been prompt and vigorous in following up, prosecuting and 



BONDS OF SURETYSHIP. 335 

punishing clerks and others who have broken faith under their fidelity- 
policies. They have proved themselves enemies to the practice of 
compromising with defaulters and thieves. We have had, under the 
old system of bond-giving, some most scandalous instances of com- 
promising with rogues who have been able to pay back tempting 
proportions of their abstractions, and this commendable course of the 
guarantee companies should be recorded to their credit. 

Some claim that excellent men are sometimes kept out of good 
situations in banks because they cannot secure individual bondsmen. 
I think that such instances are exceedingly rare. I have never observed 
even one. But I have known unfit persons to be thus shut out from 
the places in question. 

Others urge as an argument against the personal bond system that 
bank officers place themselves under very disagreeable and even dan- 
gerous obligations in accepting bonds of this character, and in very 
unpleasant positions in asking for them. 

But the thoughtful man, who fully recognizes that we cannot get 
along in this world without being under obligations to everybody, on 
all sides, will give but little heed to this objection and will consider 
contingencies of this sort as so extremely rare as to be hardly worthy 
of being counted as a force in the premises. 

These individual bonds are generally signed by kind and generous 
men of means, for the simple purpose of helping along the deserving. 
They neither hope for, nor wish for, any other recompense than the 
consciousness of having done for others what they would like others 
to do for themselves under similar circumstances. 

It often affords a good man a deal of satisfaction to help along a 
young man by signing his bonds ; and, in a vast majority of cases, he 
takes very little risk, and a good deal of pleasure, in so doing. The 
rich man, who is a wise and good man, is aware that it is as necessary 
for him to keep the pores of his heart open as those of his body, if he 
would enjoy good mental and physical health. 

MORAL VALUE OP A BANK OFFICER'S BOND. 

But, after all, what may be termed the moral value of a bank 
officer's bond is something deserving here of careful consideration, since 
upon this point hang the main issues of the question we are discussing. 

This moral value of a bank officer's bond may be large. Its actual 
money value, compared with the opportunities which exist under it 
for going wrong, is almost always really insignificant. The bank 
officer gives a bond for ten or twenty thousand dollars, and enters 
upon a position of trust and great responsibility, where he may, if dis- 
honestly disposed, default in hundreds of thousands of dollars. 

And this moral weight and force of a bond must always depend 
largely upon the character of its origin. It is an hostage given — a 
testimonial furnished. And when signed, without compensation, by 
the personal friends and family of a bank officer, who have the best 



336 PRACTICAL BANKING. 

opportunities in the world for knowing what he is and what he is 
likely to continue to be, it is in inany respects the best sort of hostage 
and testimonial that can be given, and the last one that is likely to be 
violated or prove valueless. 

The bank officer who wilfully violates bonds of this sort, ought to 
be consigned to a treadmill for life. I am glad the record shows that 
marvellously few of them have done so. 

The guarantee companies have a good field before them, and can do 
a good work — can work along in perfect harmony with the individual 
bond system. They are specially needed in cases where probate, or 
official bonds to the government, of vast amounts, are required. 

TAKING THE OATH. ' 

In the early days of banking in this country, when this business 
was all done under State laws, there were in existence many curious 
methods of practice in the administration of the internal affairs of 
banking institutions. It was quite a common thing in those old days 
to require all bank officers to take an oath of office, but I believe there 
is no record whether the bond was considered as supplementary to the 
oath or the oath as a postcript to the bond. 

Here is a form (see Form 77) of one of the old-style oaths — one that 
was administered down to a period as late as 1854 to the officers of a 
leading Massachusetts bank, which is still running along and doing 
a safe business without the use of oaths of this sort : 



" I (3_Aj<L>_a-a_> <s&j*JjJL do solemnly swear that I will faithfully, 

and to the best of my ability and knowledge, perform the duties now assigned, 

or which hereafter may be assigned, to me as -(Lhx^&Jvjljla. of the 

<^JLcxjo^cL<xaJL U^xiljo^iC and that I will not impart any knowl- 
edge of the concerns of said bank, except to those persons who have the 
direction thereof, unless required in a Court of Justice, so help me God. 

"(Signed, etc.) (5_ajo^^i_fl-> c^vJjtiv.." 



Form 77. 

This custom of swearing in bank officers is of English origin, and I 
found the English banks still following it. 

FIDELITY COMPANIES' INQUIRIES. 

It will be of interest to notice the thoroughness with which one of 
these guarantee companies looks up a man. When persons apply to 
one of these companies for an insurance of their fidelity, they are 
requested to give the names of at least three parties as special reference 
— persons to whom they wish applications to be made for knowledge 
of their character, standing, general habits, and natural qualifications. 
The company uses the names as suggested. They also take additional 
measures to acquaint themselves with their bond-seeking men. Among 
these methods of inquiry is the following : 

They employ the mercantile agencies of the country — concerns 



BONDS OF SURETYSHIP. 



337 



which have excellent machinery for the work — to make exhaustive 
investigation of these applicants. And the character of the investiga- 
tions they undertake is best shown by the following copy (see Form 78} 
of one of their examination papers — an actual working model, names 
only changed : 



(N. B.—It is particularly requested that no inquiries be made of the Employer or Employee 

in any case.) 

Please give us in confidence, and for our own exclusive use, what information you have 

respecting — \. <s>. ^^Aoijtiv, x»^_fl_> 2&i<=» — for the past le> j>*oGlj^JO\_a. - 

employed as u $JZJz~A'C-A(.jLjL.kjuv. Jixjj. AJt>..b_j c\jji_juJOv J\ xySXLjuau^^oJL o.xxjuJk-, 

.xvjfc J Vjk_A*^i./LtoL>^, "tojQLjoooCtu. joJL C<?j6okJL>f., <s$WLojfca_> jqJL «C*jQuk*v.CX. 

Eemarks: j 

INFORMATION DESIRED. 

Is he married! f\A. - 

If so, what family ? ----- 

Does he board, or is he a householder ? (Jojcux^Aa. jux^tiv JLaJli>_jLA. _ _ 

Are his habits good ? ^U-jLyL ; xmJLu. JLooov., j^uoJc yUlA^cJfcLu. £juuuJi_s-A_^3jt-ft.. 

Is his style of living compatible with his position? JHxl Ajo^uJLt - 

Are any of his family (depending on him) of extravagant or bad habits? JSjo. — 

Is he honest and of good general character? Si - "-^ ~ 

Has he any property, and, if so, what? JXa^. t XKa^^aC i\_a_> i^ou6, 

Is it enoumbered ? — - — 

If in debt give particulars ? Jja-a*. £ £rjua^X ivj»_> jutk. a_a*. JLaJLt 

General reputation for reliability, etc. ? ^juv^ajt-xJlxx^jA-.--- 



Semarks : 



Montreal, Xjo^^uJLla. 7, 1 S^O. Subscriber Ho. 5oL». 



Form 78. 
OFFICERS' BONDS WITH EXTENDED NATIONAL BANKS. 

Under the very general renewal of charters by our National banks, 
there has arisen an interesting and most important question relative to 
the status of the bonds of their officers in this form : 

When a bank gets an extension of its charter, is it obliged, for its 
own safety in the premises, to call upon its officers for a renewal of 
their personal bonds ? 

The point has been made by A. S. Pratt & Sons, of Washington, 
the Washington agents of many National banks, that re-chartered 
National banks should, as a measure of prudence, require from their 
officers a renewal of their bonds, because the question whether such 
a renewal is needed has never been passed upon by the Courts, and it 
has been difficult to collect bank officers' bonds on account of technical 
defects found to exist in them when they were brought to the severe 



338 PRACTICAL BANKING. 

test of a lawsuit. They have scattered widely among the National 
banks, in a digest of reorganization duties prepared by them, the 
statement that one of these duties is a renewal of the bonds in 
question. The banks receiving this ' ' digest " very naturally concluded 
that it was a digest of existing laws and decisions relative to those 
questions. But it is important to remember that the statement of 
the renewal being a necessity was not made as a conclusion of law 
ljut as a suggestion. 

I think that the recommendation is an unwise and unnecessary 
one, and unhesitatingly answer the question, stated above, in the 
negative. The reason for this opinion is found in the National Bank 
Act. And it is a matter of surprise that many intelligent bank 
Managers, with this Bank Act before them, have obliged their corps of 
officers to go through all the trouble of making the renewal in question. 

Here I let the Bank Act speak for itself on this subject. It makes 
the plain declaration, for the purpose of covering this and similar 
points, that the bank which extends its existence, by a renewal of 
its charter, ' ' shall continue to be in all respects the identical association 
it was before the extension of its period of succession. " 

But, if the charter-extended bank was not thus legally proclaimed 
the same bank, the form of bonds almost invariably given by bank 
officers would stand firm and strong with the renewed institution, for 
their reading, in very vital clauses, is as follows : 

" as sureties are hoi den and stand firmly bound and obliged, unto THE 
EESERVE NATIONAL BANK OF NEW YOKK, in the sum of dollars, 

to be paid unto the said EESERVE NATIONAL BANK, their successors and 
assigns ; unto which payment, well and truly to be made, we bind ourselves, and our 
respective heirs, executors, and administrators, jointly, severally, and firmly, by 
these presents, etc., etc." 

It is easy for any intelligent banker or lawyer, by studying the bonds 
and the United States laws, to reach the conclusion that there is no 
real need of making the change in question when a bank obtains an 
extension of its charter. 

If there is no necessity for so doing why put bank officers and 
bond-signers to the trouble of going through useless forms simply 
because parties who have not carefully studied the matter hinted that, 
as a matter of prudence, it would be better to obtain the renewal. 



COMMONPLACE CAKES. 



CHAPTER XXII. 

COMMONPLACE CARES. 

It has always been a question with banking men whether banking 
rooms, in our large towns and cities, should be located upon the first 
or second floors of their building. Some excellent bank Managers are 
heard asserting that they could never think of having their banking 
rooms up stairs, while other good bankers assert, just as strongly, that 
it is a very poor plan indeed to locate them on first floors. 

There is much to be said on both sides of this question. There has 
been, of late years, a very active, and, in some respects, an over-done 
competition among National banks for business — for deposit accounts. 
This competition, which has culminated in the adoption of the very 
wide-spread custom of paying interest upon demand deposits, and 
granting immediate credit, free of exchange charges, for deposit of 
checks and drafts payable far and near, has also led bank Managers to 
cater for trade through the influence of very elegant banking apart- 
ments upon the ground floors of attractive buildings situated in central 
locations. 

Without doubt it is now the general opinion that there has been, in 
very many quarters, too much extravagance and ornateness of display 
indulged in, in fitting up bank rooms. Within the last few years there 
has been a reaction in this matter, and the Pullman-palace-car style of 
arranging and fitting up banking quarters has been giving place to 
ideas of simplicity and propriety in this matter. 

"The best trade," if we may be pardoned for using the expression 
in this connection, is, in these days, more likely to be diverted from, 
than attracted to banks by plate glass, gilded rails, marbled counters, 
and rich decorations. 

It is urged in favor of rooms on the street that such are more likely 
to attract paying business, since the average depositor of the period is 
in a hurry and does not wish to climb up stairs. But this objection to 
climbing rather fades away in the light of the reflection that this 
average depositor generally keeps a good supply of boys, who will go 
where they are sent, and who can go up the stairs two steps at a time 
without much thought. 

I do not forget that the bank wants also to be accessible enough to 
lend its money easily, but I have noticed that borrowers who hear that 
a bank has gained largely at the clearing usually find very little 
difficulty in climbing stairs in search of low-priced money. If an 



340 PRACTICAL BANKING. 

advantage of convenience is upon the side of the low-down bank, that 
of great safety in many points is with the one up-stairs. 

Of more importance is the question of the internal arrangement of 
the rooms. At any rate this matter is of pre-eminent importance to 
the public and to the working officers of the bank. 

It is, of course, exceedingly desirable that all banking rooms should 
be well ventilated, well lighted, and properly warmed at seasons 
needing artificial heat. 

In the matter of ventilation, there are plenty of theories afloat. In 
giving attention to this point, adopt the most sensible and advanced 
ideas regarding the matter, and see that they are carried out. 

The best winter ventilators of any room are open fires in a grate, or 
the old pattern Franklin stove, Professor Williams of the Royal Society 
to the contrary notwithstanding. 

I have in mind one of the pleasantest banking rooms in the country, 
which is heated and finely ventilated by a fire in a large old-fashioned 
Franklin stove, to which is attached long piping of Russia iron. 

Apparatus for the use of wax in sealing should have special 
ventilating, smoke-clearing, arrangements. 

For material for the finish, desk, and counter work, ash, oak, or 
cherry is much preferable to any darker woods. 

In small banks, where only one or two officers are required, the 
room arrangements, as regards situation of desks, counters, and 
general accommodation for the public, can be quite simple and yet 
of a neat, attractive, and convenient character. 

But in planning accommodations for many departments, a heavy 
corps of clerks and a very large business, banks are called upon to 
exercise the most skill and common sense in fitting their working 
machinery — rooms, desks and public counters — to meet the demands 
of their situation. 

It is poor economy to give the clerks scant room. They should be 
generously supplied with space in which to do their work, plenty of 
desk room for the books, and plenty of counter room for handling 
money, sorting checks, etc. 

Then the desks should be so arranged as to put to profitable use the 
best daylight the location of the rooms will afford. If there are dark 
corners and windowless recesses, they should not be occupied by officers 
who are to be constantly called upon to handle money, to be on the 
watch against taking bad money, to pay checks, and to be on guard 
against paying forged checks, but should be used by the public, who, 
in dealing with the bank, come and go quickly, and are not so specially 
in need of the brightest light. In fact, all the bank officers should be 
given the best possible light, while the Directors' rooms, reception 
rooms, etc. , can take up those portions of the area which cannot be so 
well lighted. 

It is in the direct interest of a bank that the health and eyesight of 



COMMONPLACE CARES. 341 

its officers should be protected as far as possible ; and officers who are 
condemned to work by gas-light in banking hours are endangering 
both health and eyes. 

There are very many instances in banks where architects, who have 
not had in view the right end, in arranging desks and counters have 
deliberately consigned bank Tellers and Book-keepers to a life of gas- 
light misery by giving them the dark side of a bank and the public and 
the Directors the best light of the room. 

Tellers should be located where the dealing public can readily reach 
them. 

Book-keepers should be within easy reach of Tellers, particularly 
Paying-Tellers, for these last officers are continually wishing to consult 
ledger balances, without noticeable delay or objectionable conspicu- 
ousness. 

It is not at all pleasant for a check-drawer, particularly if he is an 
honest and sensitive man, to be called upon to observe balance- 
hunting delays over his good check. Customers have been driven 
from banks by obnoxious points of this nature. 

Cashiers should be placed where they can quickly consult with 
Presidents, where working Presidents are in the chairs. 

Messengers and Collection Clerks should be located near each other, 
for the Messenger is the assistant — the complement of the Collection 
Clerk. 

Discount officers should have their desks where they can be con- 
veniently reached by the customers of the bank. 

Every bank should have, if possible, a reception room, where officers 
can meet callers, a neat lavatory, and a lunch room. 

With the bank rooms thus thoughtfully and conveniently arranged 
the next point in order is as to their daily care. 
CARE OP THE ROOMS. 

There are few if any reasons why all banking rooms should not be 
clean, and if they are otherwise it is not as a general rule because the 
shareholders do not desire that they should be so, as they are perfectly 
willing to pay to have them kept clean, but it is on account of the 
carelessness and want of taste on the part of the Directors or Cashier 
and their neglect to see that subordinates, particularly the Messenger 
or janitor, do their duty. 

Nothing short of the strictest order and neatness should be accepted 
as the result of the janitor's labors. 

A dirty, badly ventilated bank room is not only demoralizing and 
injurious to all its officers but it is bad in a business sense because the 
opposite state of affairs draws business by attracting new accounts. 
Why is it not a good idea to have the windows of a bank kept clean, 
its floors and stairs scrubbed or varnished, its walls and ceilings neatly 
colored, its public desks well supplied with public stationery, its desks 
tidy and its floors not littered with stray papers ? The interiors of 



342 PRACTICAL BANKING. 

many of our banks are open to considerable improvement in this direc- 
tion. Bankers have an idea that our cities eclipse the world in the cost 
and elegance of their banking rooms. It is a fact that many of them 
have been fitted up without much regard to expense and in some 
instances with unwarrantable extravagance, but some of the most 
ornate of these offices are as open to the charge of untidiness as the 
humble little banking rooms in the corner of a wooden house in the 
rural districts. 

No offense is intended by presenting any unfavorable comparisons, 
but the banking rooms of our American towns and cities are not upon 
the average nearly as neat, tidy and appropriate for their business as 
those of foreign countries. 

CARE OF THE BANK WASTE PAPER. 

Neat and tasteful waste-paper baskets should be supplied to the 
various departments of the bank, and there should be a rule that no 
piece of paper of any sort should be thrown, or allowed to remain on 
the floor of the rooms. Otherwise, money or valuable documents may 
be lost by dropping them accidentally into a confused mass of litter 
under foot, while if the floors are kept scrupulously clear of all paper 
the fallen check or bill will at once attract attention and be rescued 
instead of being lost in the mass — taken to be waste-paper like the 
rest of the litter. 

But even in the waste baskets lurks a source of danger, and valuable 
papers may quickly through accident, be hidden in them, and soon be 
consigned to the janitor's rubbish heap, where an early sale or destruc- 
tion impends. 

To avoid this difficulty the bank waste-baskets should be emptied 
as fast as filled into some safe corner in storage rooms, where they 
should be carefully preserved for a considerable time. The reasons 
for this course are evident : It was the middle of July ; and, in a final 
examination of an account rendered by a corresponding bank, we 
found that we had not given the correspondent due credit for a check 
remitted us the middle of June. Letters showed that we had duly 
received and acknowledged the check, but further trace of it could 
not be found ; and it had never been presented and collected. Under 
the best of systems such a thing will happen. The janitor was 
summoned. He was given a description of the missing paper and 
directed to hunt for it in his June waste-paper. The hunt was a 
weary and dusty job ; but the check was found in the pile, presented 
and collected. 

Here is a handy and perfectly practicable plan for caring for the 
paper in question — a plan which I have introduced into a large bank, 
and which has served its purpose well : 

Plain cotton bags, of a size sufficient to hold the contents of a week 
of waste-paper baskets, are prepared to the number of eight. When 
one is filled with the contents of a week's waste baskets it is tied, 



COMMONPLACE CARES. 345 

dated and stowed away. The bags are thus filled, week after week, 
till the entire eight are all stowed away in the order of their dates. 

When another bag is wanted for the papers of the next week that 
which was filled first and bears the oldest date is emptied into a bin. 
and the bag used again with a newly dated tag. 

By a continuance of this system the waste-paper of the last two 
months will always be within easy reach, and in consecutive order, 
each weekly accumulation by itself in one bagged division. Two 
months is about as long as a large and busy bank can hope to keep in 
hand its waste-paper ; and if it can do this without getting it into such 
inextricable confusion that the porters in search of lost papers of 
value have to hunt through all to be sure they have examined a given 
day, it will be better than many large banks I am acquainted with 
have so far succeeded in doing. 

I will also add a suggestion, that the contents of each basket be 
carefully examined by some one competent to distinguish valuable 
papers from worthless ones before they are put out of sight. 

BANK LOCKS. 

"Without doubt the best that can be used are of the self- operating- 
time-combination class. These are the finest fasteners for the doors of 
bank vaults that have so far been invented. 

As an illustration of the progress which has been made in the last 
few years in a single direction in this matter of material protection for 
the valuables of banks, it is interesting and important to note that the 
combination lock, which in its earlier stages was comparatively easily 
made a victim to Mr. Yale's wonderful micrometer, has now been so 
improved and perfected as to absolutely defy the searches of this little 
detector. 

Unquestionably, ingenuity exercised in the lock-making direction: 
may in time develop new types of locks which will entirely eclipse 
anything in that line now in use and will make those now recom- 
mended seem clumsy and antiquated. We have, however, to deal 
only with the present. The duty of every bank Manager is to see that; 
the bank in his charge is provided with standard vaults and locks of 
the period. In the matter of caring for the property of his share- 
holders he is bound to exercise due diligence. In acting as the custo- 
dian of special deposits and collateral that are the property of his 
dealers the law will hold him liable for loss which is the outcome of 
negligence in not providing proper protection in the way of safe 
vaults, doors and locks. It is not a valid defense for a bank which, 
has been entered by burglars to argue that it has taken as good care of 
the collateral upon which advances have been made as of its own special 
securities. It will be called upon to show that it has maintained the 
customary and proper guard and that it has not fallen into hasty and 
careless ways. 

There are a few points relative to the modern lock — the combina- 



S44 PRACTICAL BANKING. 

tion lock of various patterns and various degrees of merit — which. 
should be noted. 

The President of a bank should place a record of all the combina- 
tions under seal in the vaults of some other bank or safe deposit company. 

The doors of vaults which are locked by combinations should have 
•double sets of locks so that if one set gets out of order the doors can 
be opened by using the other. 

When combination locks are placed in the hands of locksmiths to 
clean and repair, their combinations should be changed when they are 
received back before they are again used. The following somewhat 
sensational statement taken from a lock-maker's circular proves this to 
Ibe a necessary precaution : 

In several instances there have been found experts, locksmiths, and others in 
large towns who have upon their memorandum book the combinations of all the safes 
of the principal business houses and banks of that town or city, and can go at any hour 
-and open them or give information to others who can then do so. 

Vaults and locks should be often examined, repaired, improved and 
exchanged, and every bank Cashier should remember one remarkable 
dfact regarding the modern combination lock. If not properly looked 
rafter, regularly and thoroughly examined and cleaned it will be liable 
to shift and change its combinations while being manipulated in the 
regular manner. Instances where these locks have themselves changed 
their combinations in this way have come under my notice. 

In some banks a danger has been allowed to creep in which did not 
'Often exist under the old-time fashion of the key locks. Then, well- 
ananaged banks were sure to arrange that the keys of the inner and 
♦outer doors should be given into the over-night custody of different 
•officers; but of late years I have been cognizant of instances where 
very large banking institutions, with combination locks upon their 
most important vaults, have allowed one officer (the Cashier) to carry 
In his head all the combinations, by this arrangement giving him the 
opportunity to go to the bank at any time of the day or night and open 
•everything— to pass through the inner and outer doors of all the strong 
rooms. One great point of danger in such a lock arrangement is found 
in the fact that burglars can capture such officers and conduct them 
;alone to bank vaults, which they have full power to open without the 
aiecessity of summoning others. 

The large diamond and jewelry dealers of London can teach such 
Ibanks a profitable lesson in the locking-up business. I have been 
observant of instances in London where dealers of the class I have 
inamed have seven-man vaults. That is, they had strong rooms which 
it took seven men to open. One of the men had the master-key of 
which the other six had a part. The doors could neither be locked nor 
unlocked without the presence of the seven persons. Every night a 
pass-word was given out, and the wards of the lock were arranged 
^according to the pass-word. 

There was a time within the remembrance of most experienced 



COMMONPLACE CARES. 345 

bankers, when the vaults of all the banks of the period were locked 
with keys of cumbrous size, and many were used to a single door. In 
the best arranged old-fashioned banks there were at least two huge 
iron doors to each vault and at least two sets of locks and keys to each 
door. A portion of the keys to each vault were generally taken home 
by the Cashier when the business of the day was done, and another 
portion — the complement of the first — were taken by the Messenger to 
the house of the President and by him put in a safe place. 

In some banks, where the work extended far into the night — notably 
the case with the Suffolk Bank at its busiest season during the famous 
redemption period — the Presidents had to sit up late at night waiting 
for the Messengers to come with the trunk of keys, for there were so 
many and such heavy keys in use by every bank that they had to be 
carried in small boxes specially made for them. 

No single officer of any bank should be the custodian of the entire 
set of combinations to a vault. It is unsafe for both bank and officer. 

BANK 'WATCHMEN. 

The best bank watchman is the best vault, safe, strong room, or 
whatever the safe deposit place of the bank may be termed, that can 
be constructed within the means at the disposal of the bank for setting 
up this part of its banking machinery. 

In the matter of selecting locks, safes, vaults, etc. , get the best, for 
the best is none too good. And the next agent of a standard man- 
ufacturer of -articles in this line that comes along will not hesitate a 
moment to say what is the best. 

I have not the time nor the inclination to enter into any close 
discussion of the merits and demerits of the various styles of locks and 
vaults which are being pressed upon the attention of bank Managers. 
Every intelligent banker should study into this matter for himself, 
and not rest till he feels confident that his bank is well fortified in 
point of safe, vault, and lock appliances. Common sense, general 
intelligence, and the average of acquaintance with mechanics, are all 
that is needed to enable a banker to decide for himself in the premises 
in question. There have been the most marked improvements made 
in the construction of strong rooms during the last ten or fifteen years, 
and all the methods and ideas relative to this sort oi work are matters 
of public information. 

The vaults of the Bank of England, the wonderful fortifications of 
the National Safe Deposit Company of London, and the spacious strong 
rooms of the banks of that city are, perhaps, as good models of work 
of this sort as can be found in the world ; yet I found their Managers 
ready to show them to enquiring strangers, and I saw in London papers 
explanations, which I preserved, giving the most detailed accounts 
of the way some of the last and best of the strong rooms were con- 
structed. 

But give a burglar time enough and he can get into any of these 



346 PRACTICAL BANKING. 

strongholds. What honest mechanics have builded dishonest mechanics 
can batter down, or grind into, if time enough is given them. 

Every bank that can do so, should have private watchmen sleeping 
at the door of their treasures, and should avail themselves, also, of all 
the modern electric burglar alarm safeguards. The bank which does 
not keep alive in this matter of mechanical, and every other sort of 
protection for the property of its shareholders and customers, assumes 
an unwarrantable responsibility — will find itself open to direct censure 
if troubles come through its carelessness in this matter. 

It has sometimes been urged, as an argument against the employment 
of watchmen, that it is not right to put men in such hazardous positions, 
simply for the protection and preservation of material property. It is 
in view of such an argument as this that some bank Managers, who 
have believed that there was nothing that could take the place of a 
good watchman in a bank, have used the most careful means to secure 
his personal safety while on his lonely vigils. Here is an instance 
illustrating this point : One bank has had its vaults so constructed that 
they rise like a round tower through the center of their banking rooms, 
and are thus open to inspection on all sides. The night watchman 
ascends from the banking room by a ladder to a secluded and well- 
protected room above the banking rooms and vault doors, and pulls 
his ladder up after him, from which point of vantage he can, in case of 
need, look down and shoot down, and raise alarms through electric 
connection with the police. 

Another bank, with the same humane end in view, has placed about 
their watchman the strongest iron doors and shutters, which are only 
visible and only in use after the watchman has taken up his quarters 
for the night, at which time they are closed over the ordinary doors 
and windows. 

The most vulnerable point about watchmen as an institution, and, 
therefore, the most serious objection that can be urged against their 
employment is, that unfaithful men in such positions are a great source 
of danger, since the valuable information their situation necessarily 
gives them, and the vantage ground of their position, may work the 
ruin of everything, if they yield to temptation and league and collude 
with outside rogues. Instances of this character, and very notable 
ones, have unfortunately been too common. 

But all this only emphasizes the necessity for the exercise of the 
extremest care in the selection of your men for these delicate positions. 
HOW LONG SHALL A BANK KEEP ITS OLD BOOKS AND PAPERS? 

There has been no attempt to solve this question in any quarter of 
this country. We have not been in the banking business long enough 
to demand its solution. On the other side of the water, for instance, 
in a certain bank in the South of Europe, that a friend of mine visited 
recently, which had been making discounts and paying checks on 
the same spot for 500 years, provision must be made once in, say, a 



COMMONPLACE CARES. 347 

hundred years or so, for clearing out old stocks of books and vouchers 
by making a bonfire of them or turning them into paper stock. But, 
in our comparatively new country, we have, in this matter, simply 
drifted along, generally keeping everything in the way of old bank 
records and vouchers, not daring to destroy any of them for fear they 
might be wanted the next day after their destruction, yet really glad 
when some great fire has come along and settled matters for us by very 
conveniently burning up the whole of the dusty and mouldy rubbish. 
Bankers often say that such great fires really ought to sweep over us 
once in awhile in order to cleanse us of our worthless things. 

In some States laws have been passed, limiting the time in which 
banks, etc. , are obliged to keep their old records and vouchers. And, 
in such States, bankers have, to my knowledge, swept their attics with 
considerable promptness and courage. 

During the war of the rebellion, many banks took advantage of the 
extreme scarcity and high price of paper stock to sell their attic supplies 
of books, etc. etc. , and I have never heard of any outcome of trouble 
from this clearing up. 

But there are to-day many old banks, especially in our large Clearing- 
House cities, that have, or say they have, every book and paper which, 
has been in use and seen its day since the bank began to live. 

We may say quite positively that there is little need of keeping 
subsidiary books — Paying and Receiving-Teller's books for instance — 
a very great length of time. Neither are old paid checks or stubs of 
check-books of great permanent value. All in them and on them of 
importance can be found in the principal books of the bank, and these 
should never be destroyed. They should be carefully preserved in 
such order as to be readily accessible in case of sudden call, and not in 
a confused and promiscuous heap in some hardly accessible attic. 

I found that the Bank of England had a rule about keeping vouchers, 
etc. All its cancelled notes are, for instance, filed away and kept until 
they get brown with age — say 20 years — and are then cast into the fire. 

The United States Government has never voluntarily destroyed a 
single voucher, as one of my correspondents can testify, who has had 
to dig in the archives of the Washington departments, in search of 
material for a phase of United States financial history. Accident and 
fire have destroyed some of these old Government papers. 

The discussion of this question of keeping old bank books and 
papers leads me directly to the consideration of an important collateral 
question, which is : 

WHAT VOUCHERS SHALL BE RETURNED BY BANKS TO DEALERS? 

A bank expects to return of course, to promisors and acceptors, 
all the paper which it has collected. 

When a party pays his note, or a draft which has been drawn: 
upon him, he intends, generally, to receive, in exchange for his 
money, the cancelled voucher. But it is a curious fact that very 



348 PRACTICAL BANKING. 

many payers of notes at banks deliberately go away without taking 
up the notes— simply pass in their cash, wait to see if it is right, 
.and then hasten away, leaving vouchers with the Teller. The Teller 
calls after them to stop and take the cashed paper ; but, in large city 
banks, where such incidents often happen, many escape hirn, and 
leave their notes on his hands — notes which, in some cases, he may 
Tiardly know what to do with, since he may not have the makers' address. 

The Teller of an old city bank, which has always done a heavy 
collection business, showed me, the other day, quite a file of paid 
paper which had, in a long series of years, accumulated on his 'hands 
in the way I have described. 

It is a general custom for banks to return paid checks to dealers 
who have drawn them — to return them, cancelled, with the balanced 
pass-books at the close of each month. This practice is not universal. 

I know of a large, old, and well-managed city bank which never 
gives up these check vouchers; and I doubt not there are others 
which do the same. The bank in question has furnished me its 
reasons for holding on to the paid checks — reasons which are certainly 
very logical. These checks, they say, are its only vouchers for money 
paid and charged depositors — its only receipts — and why should they 
T^e returned ? If one of these check-drawers gives an order on the 
bank for the delivery of a note left with it for collection, the order is 
carefully filed away by the bank. And why should an order for the 
payment of the dealer's money be treated differently? 

It has never been the general custom for banks keeping accounts 
wdth other banks to return to the banking correspondents their paid 
checks, though why individual checks are returned and bank checks 
retained is not easily explainable. 

Of late years many of the banks in large cities — reserve cities, etc., 
— have adopted the practice of sending home, by mail or express, once 
a month, all the checks paid for account of their interior correspondents. 
I have believed that they have done this because they wished to get 
rid of vast masses of useless vouchers, which they did not dare to 
destroy, and had little room to store. 

Some banks, in delivering individual checks, take a depositor's 
receipt for the same. Banks returning bank-checks always do this. 

I have heard it urged quite frequently that depositors wish their 
checks back because they are often the only receipts they get for bills 
paid, the payee's endorsements being those receipts. But, in a sys- 
tematic method of doing business, depositors should have other receipts. 

Referring to the matter of keeping old papers in connection with 
this check business, it may well be suggested that the banks are not 
called upon to keep paid checks very long, since depositors quite 
generally destroy them as soon as they get hold of them. 



THE CLEARING - HOUSE SYSTEM. 349 



CHAPTER XXIII. 

THE CLEARING-HOUSE SYSTEM. 

This is one of the modern short-hand processes in banking which 
few students of finance outside of banking circles seem clearly to 
understand. There is nothing intricate or mystifying in this quick 
method of making bank settlements. The circle of banks associated 
in any settling arrangement of this class simply agrees to make a con- 
junction through representatives — Messengers and Settling-Clerks — 
and at the place of meeting effect those exchanges which, in ante- 
Clearing-House days were made by the slow and wearisome methods 
of the old-fashioned familiar type. This old method demanded that 
every bank having claims upon other banks should send out Messen- 
gers to collect the same over the counters, and that all banks having 
payments to make to other banks should by their representatives make 
special trips to the creditor banks to cancel the obligations. There was 
much weary traveling for the Messengers, a great amount of paying 
and receiving by the Tellers, and much incidental risk from exposure 
of funds, all of which has, to a very great extent, been done away 
with by the institution of Clearing-Houses. 

A bank Clearing-House is about the same the world over. We 
have copied the clearing idea from London, where I found its methods 
and machinery almost identical with those of New York, Boston and 
other cities. 

We have not been using the system long. 

In Europe the Clearing-House system has been in vogue for fully a 
hundred years or so. 

An explanation of the details of the Clearing-House business may 
be made plain by taking the reader of this volume directly into a 
Clearing-House city, not having too large a number of banks in its 
settlement circle, and carrying him through a morning's settlement 
by going into both banks and Clearing-House, showing him how the 
banks prepare for the clearings and how the Clearing-House effects 
them — introducing incidentally all the leading forms in use by both 
banks and Clearing-House. The first important form (see Form 79 
on page 350) is a "sheet" supposed to be made up by the "Nat. 
Security," or No. 46: 

The banks of this clearing city are, for convenience, all numbered. 
The figures to the extreme left are their numbers, and against the 
numbers are their names. The arrangement of the order of their 



350 



PRACTICAL BANKING. 



numbers and names is in accordance with the age of the institutions. 
The ' ' Eirst Debit " column of figures represents the amounts of cash, 







SftttHnor ( 


21erk' 


^Statement. 




















KO. 


BANKS. 


FIRST DEBIT. 


ADDITIONS. 


TOTAL DEBIT. 


BANKS CR. 


NO. 


1 

2 


Massachusetts National 

National Union 


-4- 


7* 


J^. 






^O 


-9 




7* 


y 


^-3-./ 

6^^- 


■*7 

6f 


1 

a 


S 


Old Boston National 




/ J3 


<To 




4/-2-0 






^-j - ^ 




^<fc 


c- f 


3 


4 

e 

6 


State Nations] 

New England National 

Tremont National 


.2 


7^7 
/0 7 

9 oo 




/ 


?*' 


6 ? 


V 


<fv« 


o 3, 


'9 


^ 7 


3 ? 


4 

6> 

6 


7 


Columbian National 




"SC 






~6 7 


^o 




6 <7 7 


-20 








7 


e 


National Eagle 




J>/ 


^3 
















JcP^r 




8 


9 
10 
11 

12 


National City 
Washington National 

North National 
Atlantic National 


/ 

7 


i? /^ 










^O 


77° 


' 7 


? 

*7 

/ 


7 ;^ 


7* 


9 

19 
11 
12 


13 


Merchants National 


y 


"■'? 


7y 


• eT 


^ 7 <$ 


2.*r 


A? 


o^ <5 


O A 


/^c 


J~X 


13 


14 


Traders National 


• 


^-3-v? 


/ / 














/sso 


P y o 


<f^hf 


14 


15 
10 
17 


Hamilton National 
Market National 
Second National 


7 f 

/ 




?? 
3<e 


.2 


66d 


0,0 

'7 

6 7 


7' 






/o 


fy. ? 

o o o 


**<L 


15 

IS 
17 


18 


Atlas National 


• 6 


*T/ <d~ 


\rt 


-2-^ 


o o o 




•Jo 


^T6 


-z> 


3-2.0 


/oT 


13 


19 


Shoe and Leather Nat'l 


•Vo 


f6 -3 


■2.0 














-f 


5&xJ- 


jo- 


19 


80 


Shawmut National 


cTfe 


Jo eT 


3^ 


_? 


O ■** J 


-2-© 


tSZz 


J sT-S 


cr^ 




f 7 o 


/ 


20 


21 


National Exchange 




/aT^ 


fxT 
















-2-0 


21 


22 


Nat'l B'k o! Commerce 


/ 


6/^5 


7^ 


& 


7'? 

/ o 

■2. © O 


^^ 


<f 


^ J J 


-Z JZ 








22 


23 
24 


Nat'l B'k of N- America 
Faneuil Hall National 


/ 




^7 
& 7 






/ 


" 7 y 


6 7 


/a, 

3 


/ <D" 




23 
24 


E6 


National WebsUt 


/ 


f*%TK> 


*-s 














o?0 


vi»/ o 


7^ 


25 


26 


Eliot National 


/ 


-HV-2. 


3 6 




S~o o 




^ 


o-V-Z- 


j6 




^^ 


,& 


26 


£7 


Howard National 


£*r 


V-i-2- 


-2 <S 














2.S 


7 7 ^ 


<j-«/ 


2T 


28 


Suffolk National 




/ <£ ^- 


6o 


7 


/» o 




7 


z& 3, 


6o 




JLd. 


s-6 


2* 


29 


Globe National 


^ 


+> 6<S 


X J- 




^/ <s 


6o 


V 


&fj>. 


7«J" 


/ 


iTb o 




2» 


81 


Freemans National 




/** 


' o 




oT^V 7 


2^" 




iT6 / 


^.iT 




P7 


i,<r 


Sli 


32 


Boylston National 


_£ 


6«T/ 


3<J- 














of 


oa-3. 


/ *x 


32'. 


33 


Blackstone National 




J2. ,JL, 


^9 


/ 


?'* 


^ 


-3 


'7 s 


/ f 


-^ 


jj-<r 


J-a-t 


39. 


04 


Boston National 


-2/ 


^°<? 


'9 




Vo o 




-2 / 


^O J 


'? 


*j 


7<3 aT 


=r-y 


3* 


S6 


Maverick National 
"National Hide & Leather 


f6 


7 9* 


7** 






6? 




sT-3 2, 


^<5 


/*r 


6o,<s 


7^ 


35 
3« 


37 


Nat'l Bank Redemption 


<iT 


£m~v* 


«*-/ 


/3 


o o-^/ 


?° 


/f 


6 cTcP 


-v / 




cj-*^ 


3T 


39 


First National 


-2-V 


7""' 


o-/ 


oj- 


O O o 




*7 


7^ 


o/~V 


06 


3» 


40 
41 
42 
43 
44 


National Revere 
Nat'l Bank of Republic 
Continental National 
Mt. Vernon National 
Third National 




*y^ 






fo o 

^•J-o 
o o o 




/ 

/ 

/ 


//6 


-VcT 

o o 


// 
/a* 


7J-2- 


■ 

V 


49 
41 

42 

49 


40 


Everett National 


< 


r<s= 7 


<f-*S- 




/ o o 






($<^^ 


<=^-^ 




6^ 


-** 


43 


46 


National Security 


























43 


47 


Broadway National 


























47 


48 


Natl B'k Commonwealth 




2- J -2. 


o -i- 




/O O 






J>o 2, 


<3-e 




2.2.0 


7° 


48 


49 


Central National 




<z<,^ 


6 J" 




-2-C7 






ZJl. ^ 


6»r 


rf 


<f-^ 


7° 


49 


60 


Manufacturers National 




^6 <i 


u - / 




/6 7 


^*r 


/ 


OJ< o 


7 C 




3***s 


^^ 


50 


6) 


Fourth National 




/ o_o 


-2--M 




J - o © 






6 o a 


-z+t 




38 




61 


62 


Metropolitan National 




-*7 


j-o 




.2 


6o 




/o 




aTd 




62 


63 


Merchandise National 


























63 


64 


Lincoln National 




/*3 o 
















, 






64 




FOOTINGS. 


-V/ >L^ 


l*r, 


7" r 


/3^ 


■2?/ 


°f 


J--v6 


VJ-J& 


*<s 


^VvT 


J"vTi 


/ 














bl 


LANCE 










7o 


Ot-i <-, 


rs< 


<%L6*</\ 




















J 




»r>4«^ 


*/S2 


n 





Form 79. 



THE CLEARING - HOUSE SYSTEM. 



351 



checks, etc. , which the bank holds — and has made up before the early 
morning receipts — against the banks against which the sums are set. 
"Additions" are the later receipts of demands against these same 
banks. "Total Debit "the sum of "First Debit" and "Additions," 
—these three columns are made up at the bank before starting for the 
Clearing-House. 

The fourth column of " Banks Credit " records the sums which each 
of the other banks brought into the clearing against the Nat. Security, 
and its total is of course the aggregate of the demands of each of its 
clearing neighbors. The difference between the foot of these two 
columns is the gain or loss which has been the outcome of the morning's 
settlement. In this case I have given a sheet where the morning's 
clearing gain was $69,900.82. 

That is, all the banks of the Clearing-House brought in and delivered 
to the Security checks against itself amounting to $69,900.82 less than 
the checks on the other banks which the Security took to clearing and 
delivered to them, and the Security is, therefore, entitled to a cash 
payment from the Clearing-House of that amount. 

I have said that the sheet is mainly made up at the bank. 

As the Clearing-House session begins promptly at 10 o'clock it is 
necessary for a Settling Clerk to be at the bank some time before that 
hour in order to properly prepare his statement. The preparation of 
this sheet is conducted differently in banks, but an ordinary method is 
to make the first debit entries from the record on the Teller's book 
where the checks have been listed against each bank and footed as a 
part of the previous day's work. These checks have also been assorted 
and perhaps listed on the "Exchange Slip " (see Form 80) as well. 







6 


-5 
6° 


o 

10 


_5 

GO 




j § 


oc 

T— 

I- 




O & *- 


«o 


J- 


o 

o 


O 


CO 

u 
Q 

I 

X 

o 

X 
111 


' <£ 


i 

4 


— 




— 




% 












G 


> 






5— « 

1 P^ 









Form 80. 

Then come the checks received in the morning's mail or by early 
deposit, and of these a supplementary entry is made against each bank 
and on the slips, and the amount of the additions in each case is 



352 



PRACTICAL BANKING. 



carried into the second column and a total extended into the third 
column of the sheet and a final footing made. The checks on each bank 
are then pinned up with the proper Exchange Slip (see Form 80) ; the 
footing of the slips compared with the entry on the sheet, and the 
packages put in numerical order for delivery at the Clearing-House. 
The next thing to do is to make out the check tickets (see Form 
81) which are to be delivered to the other banks with the packages. 









No. 26, 




ELIOT 


^ATIOKAL 


BAKK, 








FROM 




No.. 


...ifU- 


-NAT 


. <&JUC-JuUvuOuul-- 


-BANK, 




aoifa.- 


— -Dollars— $U- 


....Cents. 



Form 81. 

This morning preparation for the clearing is one of the busiest 
periods of the day — both the Tellers and their clerks and probably 
assistants from other departments put in the best work they are 
capable of — there is never any time to spare; and the bank whose 
clerks never have to run in order to reach the Clearing-House in time 
to avoid a fine is a marvel of good management. Each bank sends to 
clearing a Settling Clerk, in charge of its sheet and to receive pack- 
ages, and a Messenger to carry and deliver its packages. 

When the Settling Clerk enters the Clearing-House and passes to 
his place he delivers at the Manager's desk a Credit Ticket (see Form 
82) showing the total amount he has brought in from which the 
Manager's Clerk makes a credit entry to his account. 



***** 
'■ . * 



M 


1- 


* 


# 


tol 


* 


# 


5* 
O 


* 


* 


* 
* 


* 


H 


* 


# 




* 


* 


H 


* 


* 


* 


# 


O 


* 


* 


Ul 


* 


# 


QC 


* 


# 
# 


o 


* 
* 



***** 



No L+l BOSTON CLEARING-HOUSE. 

(OctxdxjLA. a if i8qc 

XxJt. 4juLJuc>JJuy. l&^^k $5ifL,if5a.^S 

Wjia Settling Clerk. 



Form 82. 

The Settling Clerks take their places in order on the inside of a long 
counter each with his own Messenger standing over against him on the 
outside of the counter. 

The Manager strikes the bell at 10 o'clock and off starts the whole 
line of Messengers along the counter— keeping their relative positions 
and order and delivering a package and check ticket or a blank to 
each Settling Clerk as they pass before him. 

The work of the Settling Clerk is to list down in his fourth column 



THE CLEARING-HOUSE SYSTEM. 353 

the amount of each package as handed in by the Messengers filing 
before him. 

In three or four minutes his fifty or so packages are all in and he can 
make a footing and strike a balance as is shown on the sheet above. 
The next thing to do is to make out the balance ticket (see Form 83), 
showing the figures as they are on the sheet. 



¥¥¥¥¥ 

* * 

* * 


No. i^t BOSTON CLEARING-HOUSE. 


* L * 

* r * 


Dr XujJt.^iMTo^TfoauuJ*. Am't Rec'd $lfjt,,552.0l- - 


* 2 * 

* P * 

* ^ * 


Cr " " " Am't Bro't $5lfl>,lfS^.^S 


* 8 * 

J S J 


Balance $ , due Clearing-House. 


• < * 

* -J * 

M < * 

* O * 


Balance due the XcJt. 4jlx^a^. T&cuuJ*. $Ucj,cjOO.^£ 


* * 

••••* 


^jg^jl^ Settling Clerk. 



Form S3. 

This is to be handed to the clerk at the Manager's desk, but before 
doing so the Settling Clerk will assort the check tickets which have 
been put by the different Messengers into a receptacle on his desk, and 
by them check off the hurried entries which he made from the pack- 
ages themselves. When satisfied that his work is right he sends up 
his balance ticket and from these tickets the Manager's clerk completes 
his sheet and makes the final footings which prove all the work. 

The bank Settling Clerks have from 10 o'clock to 10.30 to make 
their settlement. 

It generally takes from five to ten minutes by the clock for the 
Manager's clerk to make his settlement, and, if his sheet proves, the 
work of the morning is ended and the clerks may go home. If an error 
is shown to be in some of the sheets they must be gone over again ; the 
clerk having the error must send up a corrected balance ticket, and is 
fined $2 for every fifteen minutes after 10.30 that it takes to find the 
error. 

The banks which have lost at the clearing must pay the amount of 
their several losses to the Clearing-House before 12. 15 o'clock. In the 
large cities they must pay funds such as are proper to be held as reserve 
by the banks. 

In some other places the bank's checks on Boston or New York are 
used as Clearing-House funds. 

These funds are all received by the Clearing-House Manager and! 
his clerks; counted, and made up in proper form to be paid out at 
1.30 o'clock to those banks which gained at that morning's clearing. 
Of course the losses and the gains will in their totals exactly balance 



354 PRACTICAL BANKING. 

each other and the Clearing-House after handling its milli ons through 
the day closes at two o'clock without a penny in the till. 

In paying and receiving these losses and gains considerable work and 
risk in the way of actual transfer of cash is saved by the use of 
Clearing-House orders, which may be said to pass as cash between the 
settling banks, and which are received and debited or credited as such 
by the Clearing-House Manager. Here is one of these orders (see 
Form 84.) 



GO 



$^3,000 BOSTON ©xJLoJUa. aO_18cjo 

Transfer to the Credit of c3iv.su qS^o^^Lso^! X^J:. TB^jvaX 

And charge the same in Settlement of the balance due to 

q$JL^ X<x±. Tf^wK xdL tivjo 'RjlIijuJLL^c 

To N. G. SHELLING, 

Manager. 

3C. %. cBL^JLjua-- Cashier. 



Form 84. 
CLEARING-HOUSE MANAGEMENT. 

Such a vast amount of exchange business and complicated clerical 
work is transacted in a very short time at the daily morning settle- 
ments of the Clearing-House, that it is very important that the 
representatives of the banks — two from each — who do the work in 
question should be careful, accurate and capable of performing con- 
siderable clerical labor. They must give their undivided attention to 
their business and should not indulge in idle talk or unbusiness-like 
behavior, as the slightest error on the part of one clerk may prolong 
indefinitely the entire settlement. 

In view of these facts Clearing-Houses have inserted in their by-laws 
what may be termed rigid police rules. 

The following extracts taken from the by-laws of one of the 
best-managed Clearing-Houses in the United States will give a good 
idea of what they are : 

1. For disorderly conduct of any Clerk, or other officer, at the Clearing-House, or 
disregard of the Manager's rules and instructions, for each offense, $4.00. 

2. For any officer failing to attend punctually at the hour for making the 
exchanges, $4.00. 

3. Debtor banks, failing to appear to pay their balances before a quarter past 12 
o'clock, $3.00. 

4. Any error in the Credit Ticket (that is the amount brought), $2.00. 

5. Errors in making the Balance Ticket (that is, the amount received) entries $2.00. 

6. Failing to deliver Check Tickets before half-past ten o'clock, $1.00. 

7. All other errors, $2.00. 

Any Clerk, or other officer, who shall repeatedly and perseveringly disobey the 
orders or instructions of the Manager, shall, with the approbation of the Clearing- 



THE CLEARING - HOUSE SYSTEM. 355 

House Committee, be expelled, and not re-admitted without the written consent of 
the Committee. 

!£P™ Thirty minutes will be allowed for the morning business of settlement, and 
for each additional fifteen minutes' detention, $2 will be added to the fine under No. 5. 

Below are a few important points from the general rules of the 
same Clearing-House which vary but little from those of other Clearing- 
Houses throughout the country : 

Errors in the exchanges and claims arising from the returns of checks or other 
cause are to be adjusted directly between the banks which are parties therein, and 
not through the Clearing-House. 

Whenever checks which are not good are sent through the Clearing-House they 
shall be returned by the banks receiving the same to the banks from which they were 
received as soon as it shall be found that said checks are not good ; and in no case 
shall they be retained after one o'clock. 

The Manager shall immediately report to the Clearing-House Committee any 
apparent irregularity in the dealings of any bank belonging to the Association that 
comes to his notice, and receive the instructions of the Committee in regard thereto. 

The Committee shall have power to remove the Manager or any of the Clerks, 
whenever, in their opinion, the interests of the Association shall require it. 

The hour for making the exchanges at the Clearing-House shall be ten o'clock 
A.M. each day. At a quarter past twelve o'clock, noon, the debtor banks shall pay to 
the Manager, at the Clearing-House, the balances due from them respectively either 
in coin or in such other currency as the laws of the United States shall require, or in 
such certificates as shall be authorized by the Clearing-House Association, excepting 
sums less than one thousand dollars, which may be paid in bills of the debtor bank. 

At half-past one o'clock P.M. the creditor banks shall receive from the Manager, 
at the same place the balances due to them respectively ; provided all the balances 
due from the debtor banks shall then have been paid to him. 

Should any bank fail to pay the balance due from it at the proper hour the 
amount of such balance shall be immediately furnished to the Clearing-House by the 
several other banks in proportion to their respective balances against the defaulting 
bank resulting from the exchanges of that day. 

The clerks and Messengers who represent the banks at the Clearing- 
House should be extremely prompt in presenting themselves at the set 
time. Punctuality in this regard means about five minutes before time. 
Banks should see that no officers are sent for Clearing-House ser- 
vice, particularly in the capacity of Settling Clerks, who have not 
natural fitness for their work. An incompetent or careless officer 
among so many men will set back all the work in hand. 

in passing to and from the Clearing-House bearing the checks and 
cash which are a bank's balances (the grists which run through the 
mill), Messengers should be extremely careful of the valuables which 
are of necessity entrusted to them to carry through the streets. 

LOANS BETWEEN BANKS AT CLEARING. 
In some of our Clearing-House cities, notably in Boston, the banks 
are in the habit of borrowing of each other, as their situation may 
demand, immediately after they have made their morning settlements. 
These negotiations are, of necessity, made by the representatives of 
the banks who are present at the clearing. And these representa- 
tives are mainly the Messengers and Settling Clerks of the banks, 



356 PRACTICAL BANKING. 

though it has of late years become the custom with many banks to be 
present at these morning after-clearing negotiations in the person of 
their Cashier. 

This custom has been in existence for at least 20 years, and the 
aggregate of loans of this class made there daily is very large — ranging 
from hundreds of thousands to millions of dollars. I have known 
many instances where banks, which have emerged from the morning 
settlements with gains of more than a million, have, before leaving the 
Clearing-House, scattered these entire gains in loans among losing banks 
— loans negotiated on both sides by single representatives of the banks, 
and those often junior clerks. There is nothing of this sort done in the 
European Clearing-Houses. 

I found the London bankers interested and astonished to hear that 
we indulged in financial transactions of this character. 

The loans made at clearing are loans of minute money. They are 
rarely secured by deposit of collateral of any sort. 

The bank receiving the accommodation draws upon the lending 
bank a check in its usual form. The loan is charged to it ; and, when 
it is repaid, the lending bank settles the transaction by simply drawing 
upon the debtor bank for the amount. 

The current rates for these loans are usually about one per cent, 
under those charged upon standard call loans to private bankers and 
merchants. This is because they are loans for large round sums, 
ranging say from ten thousand to hundreds of thousands of dollars, 
and because the money thus advanced is understood to be immediately 
available in the form of Clearing-House funds. 

This business of borrowing and lending between banks has, in 
Boston particularly, increased greatly within the last twenty years. 
Many experienced bankers condemn the entire practice, urging that 
Boards of bank Directors were not chosen for the purpose of managing 
capital other than that of the bank in which they have been put in 
charge, and claiming that it is all wrong that banks should, by chronic 
borrowing from other banks, fall into the habit of carrying along loans 
altogether beyond their ability to sustain were they dependent solely 
upon their own legitimate resources. 

In 1881, a vigorous attempt was made by several of the Boston bank 
Managers to break up this banking method — to transfer to the offices 
of the banks a loaning business which had so long been transacted by 
their clerks at the Clearing-House. This reform movement for awhile 
bid fair to be successful ; but one by one those who had combined 
against the practice broke ranks, and returned to the old loaning rut, 
and, in the end, the loaning at clearing system resumed its former 
sway. 

But, whatever may be the final conclusion on the main question as 
to making these loans in this manner, there is one point upon which 
most bankers are in full agreement and that is, that there should be 



THE CLEARING- HOUSE SYSTEM. 357 

some plan in force by which the rates of these clearing-loans should be 
regulated and controlled by the mutual action and combination of all 
the banks in any given clearing city. 

As the business is now running along, the adjustment of these rates 
is largely left, from day to day, in the hands of hurried subordinate bank 
officers, acting away from the bank, and without any opportunity for 
direct consultation with its Managers. 

Within late years another class of Clearing-House negotiations^- 
negotiations also left entirely in the hands of the representatives of the 
banks who meet there — has become a regular thing in Boston, and of 
large proportions. I refer to the dealings made in New York funds. 
On some days these are bought and sold rapidly and in heavy blocks. 

The details of the operations I have been describing are managed 
in this way. The bank Messengers carry into clearing in their heads 
or hands statements of the way their banks are standing in the matter 
of reserve, supply of New York funds, etc., and general instructions 
how to proceed in the business of borrowing or loaning, or buying New 
York exchange, after they have effected their settlements — instructions 
which are of course to be dependent upon the results of their settle- 
ments. As soon as these Settling Clerks have got at the figures of their 
gains or losses at the clearing, they make haste to do their best to carry 
out the instructions received at the headquarters — to lend or borrow, 
and to buy or sell New York — as the situation may demand. 

Within a few years many of the Presidents and Cashiers of Boston 
banks have been in the habit of going themselves to the Clearing- 
House, to manage the negotiations we have been describing. 

CLEARING-HOUSE RESPONSIBILITIES. 

National banks have generally attempted to hedge against the 
responsibilities of the collecting business which they transact when 
associated together in Clearing-House arrangements. The dangers 
and difficulties which arise under these associated mutual morning set- 
tlements are well illustrated in the complications that grew out of the 
sudden failure of the Metropolitan National Bank, New York. An 
earlier trouble of the same nature occurred in Boston at the time of 
the failure of the Pacific National Bank, to which more particular 
allusion is made, as it resulted in a practical movement on the part of 
the Boston banks to protect themselves against similar difficulties in 
the future. 

The Pacific National Bank was not a member of the Clearing- 
House Association. Sagacious Boston bankers who had little faith 
from the first in the management of this unfortunate concern decid- 
edly and successfully opposed its admission to the Clearing-House, 
receiving very severe denunciations in many quarters for doing so. 
But the Central National Bank, which was intimately connected with 
the Pacific, was a member of the Clearing-House. 

On the morning when the Pacific suspended the Central reeled 



358 PRACTICAL BANKING. 

somewhat under the blow, and did not respond to the Clearing-House 
demands upon it until some hours after the time fixed for the settlement 
of such demands. The alarmed banks which were creditors of the 
Central for large amounts of checks upon it which they had charged 
through clearing in regular course in the morning, in some instances 
endeavored to recover the unsettled checks, hoping to be able to 
return them to their depositors or in some way to place themselves in 
a better position by obtaining the vouchers. 

The Central refused to give up the checks. These they claimed 
were good — had been drawn against existing balances. It was not the 
depositors' balances which were deficient, it was the bank itself which 
was falling behind. The outcome of this excitement was the adoption 
by the Boston Clearing-House of the following regulation — an idea 
proposed and formulated by the late Francis Jaques, who was at that 
time the able President of the Webster National Bank : 

" * * * It being understood that they, the said banks, receive checks and items 
payable by other banks, for collection, as agents only, and do not hold themselves 
liable for any loss or damage which may accrue through the default of any bank or 
banks upon which said checks and other items may be drawn." 

In this case of the Central National, the bank raised funds and 
settled with the Clearing-House ; but it has been found necessary to 
provide a method of arranging matters left unsettled after a clearing 
bank has failed to respond to the demands made by the Manager of 
the Clearing-House. The Grant & Ward and Metropolitan Bank 
collapses, were the last influences most effective in placing the associated 
banks upon a clear and equitable basis of supplementary settlements 
in those cases where the regular clearings were left unbalanced by 
positive defaults. It is now generally provided in Clearing-House 
articles of Association, that where any bank fails to pay the balance 
due from it at the proper hour, the amount of such balance shall be 
immediately furnished to the Clearing-House by the several other 
banks in proportion to their respective balances against the defaulting 
bank resulting from the exchanges of the day; and the Manager is 
required to make requisitions accordingly so that the general settlement 
maybe accomplished with as little delay as possible— the amount so 
furnished to the Clearing-House constituting claims on the part of the 
responding banks respectively agains* the defaulting bank. And the 
further provision is also usually made, that either of these responding 
banks may cancel their exchanges with the defaulting bank by paying 
to it the amount of all checks and other items received from it through 
the exchanges of the day, and receiving in return all checks and other 
items delivered by that bank to the defaulting bank in the said 
morning exchanges. In regard to this latter mode of settling scores 
it may be noted that its application is not likely to be often called for. 
DISHONORED CHECKS RETURNED BY CLEARING-HOUSE BANKS. 

In Clearing-House cities checks charged into banks through clearing 
are considered as paid, if not returned to the charging bank before a 



THE CLEARING-- HOUSE SYSTEM. 359 

certain hour named in the by-laws of the Clearing-House Association 
of the place, which hour is one some time in advance of the business- 
closing hour of the banks. In Boston this settlement-closing hour is 
fixed at 1 o'clock. 

The second paragraph of my quotation from the general rules, 
given above, shows the form of the rule covering this point ; but we 
have to admit that bankers and courts have been found disagreeing 
in their understanding of this requirement, that " in no case are they 
to be retained after 1 o'clock." It is argued in some quarters, that a 
bad check started upon its return before 1 o'clock from the bank upon 
which it is drawn, and placed in the hands of its Messenger before that 
time to be brought back with orders to him to go at once with it to the 
charging bank, is really returned before 1 o'clock although it may not 
reach the other bank until after that hour. On the other hand, many 
banks claim that a returned check must, under the Clearing-House 
by-law named, be actually delivered to the charging bank before 1 
o'clock. I am of the opinion that the latter view is the correct one 
— it certainly is the course which avoids any question — yet readily 
concede that the regulation in question is capable of misconstruction 
and deserves to be amended. 

It is also my opinion, that a check is not returned to a bank before 1 
o'clock unless the bank to which it is returned actually receives it 
over the counter before that time. As long as the check is in the 
hands of the Messenger it is not returned — it is in the possession of the 
bank employing the Messenger. 

There is one point relative to this returning business to which 
^attention should be called. Banks are required by the Clearing- 
House rule named to return checks as soon as it is found that they are 
not good, and should not keep them, as they often do, until the last 
safe moment but return them as early as possible. 

A PERSONAL EXPERIENCE. 

Right here seems to be just the place for a bit of personal experience 
which may illustrate some points on handling ' ' not good " checks. 

The house was failing — in fact did fail before 2 o'clock of the day of 
which I write — and has never paid more than 25 cents on the dollar. 
I held one of its checks for $5,000, which had been taken the day before 
in payment of one of its notes, and had sent it in through the morning's 
clearing. Rumors soon reached me that the house was in trouble, and 
this rumor was confirmed when, just before 1 o'clock, the time when 
clearing-checks must be returned or considered paid, the Cashier of 
the bank upon which it was drawn called upon me and asked for further 
time on it — to hold it, say, until 2 o'clock, as there was not balance 
enough in the bank to meet all the checks of this name that had come 
through the clearing. " There is not balance enough just now," said 
the Cashier, ' ' though there may be before 2 o'clock. " I was, of course, 
ready to give him permission to hold as requested, for a chance to get 



360 PRACTICAL BANKING. 

my pay was better than receiving the check back unpaid. And this 
chance was made the most of by allowing the check to remain with the 
bank upon which it was drawn, for while it remained there uncollected 
it might be said to be steadily pressing for payment, and, while thus 
remaining presented, no checks from any other quarter could step in 
ahead and be collected. An important point in Clearing-House banking 
is here brought out which every careful banker will observe and clearly 
understand. 

As the hour of 2 o'clock approached, without my hearing anything 
from my suspended check, I called upon the bank upon which it was 
drawn. I found the bank was still holding all the checks that had 
reached it through the Clearing-House that had been drawn by the 
house that was in trouble — holding them on permission from the owners, 
because the house in question had not balance sufficient to meet the 
entire lot. 

And this brings out another important point in banking in Clearing- 
House cities : 

First, there not being balance enough to pay all these clearing 
checks, the bank could not pay any of them. 

Second, while all these checks remained in the drawee-bank, pre- 
sented through clearing, it could not use any portion of the balance 
against which they were drawn to pay any check of that drawer, large 
or small, which might be presented at the counter of the bank. 

As the hour of bank closing had nearly come around without 
"bringing to the drawee-bank any reinforcement of funds to meet the 
suspended clearing checks, it came to the conclusion to send them 
all back unpaid to the several banks which had charged them in,^ 
who had all given further time on them, and were now anxiously 
waiting to learn their final fate. 

And now the order and method of the return of this large batch of 
failed checks became questions of the first importance. The questions 
were solved in the following manner — the only correct manner, and 
the slightest divergence from which would have thrown upon the 
returning bank ugly responsibilities. The Messenger was summoned. 
The dishonored checks were handed to him, and he was told to take 
them back to the banks which had charged them through clearing in 
the precise order and method in which he was accustomed to take 
back unpaid clearing checks — swerving not a hair from his accustomed 
routine movements when such business was on his hands. The result 
was that some banks — those nearest to the drawee-bank — got hold of 
the suspended checks earlier than others more distant in location. 

All the bank-owners of these checks were now on the qui vive, for 
the failure had become town talk, and there was a rush by them for 
the intact balance which stood to the credit of the failed house at the 
bank which had sent back all the clearing checks. Those nearest to 
the drawn-upon-bank got hold of their returned checks the quickest, 



THE CLEARING-HOUSE SYSTEM. 361 

and were therefore able to present them over the counter and collect 
them as long the balance held out, leaving nothing for the later 
presenters. First come first served. The Paying-Teller could not 
refuse to apply this rule as the checks came pouring in upon him. 
The action of the drawee-bank was in accordance with law, custom and 
common sense, and should be followed by all banks similarly placed. 

Some banks have argued that clearing checks drawn upon an 
inadequate balance should be paid in the order of their dates as long 
as the balance holds out, the later-dated checks being the ones to be 
finally returned as not good when the balance was exhausted. But 
this is not correct banking. Other bankers have urged that the inade- 
quate balance should be divided proportionately among the presented 
clearing checks. This is also incorrect banking. 

COUNTRY CHECKS AND CITY CLEARINGS. 

In many instances banks which are located in the vicinity of 
Clearing-House cities announce that checks drawn upon them will be 
settled through the clearing of the city near them. In furtherance of 
this plan they name their city corresponding bank as their settling 
agent. Every day, after the morning's clearing, the suburban bank 
presents itself in the person of one of its officers at the bank which is 
its settling agent and runs over the checks of its dealers which have 
been charged in, accepting the solvent ones and rejecting those which 
are "not good." There is a point with regard to these dishonored 
drafts which is a frequent source of annoyance and trouble to the city 
banks which have taken them for collection. Is the presentation of 
the rejected checks through clearing, legal and solid enough for a basis 
upon which to rest a protest and notice of dishonor, or must the 
returned check, after having been charged in and rejected, be again 
presented in a formal and regular manner at the counter of the bank 
upon which it is drawn? The latter course, if necessary, becomes 
embarrassing, since the drawee bank may be distant enough to render 
it almost impossible to make this required demand on the day of the 
settlement. It is unquestionably the safest course to make this square 
demand upon the bank; yet the collecting bank, which has made the 
demand charge through clearing in full accordance with notices from 
the suburban bank, would have a strong case in Court in defense of 
its course. The question would undoubtedly largely turn upon the 
character of the notices issued, by the suburban bank, in setting up for 
itself this system of paying its checks through the city clearing. 

There is another point relating to checks upon suburban banks 
which needs particular notice. Many dealers with these near-city 
country banks have a custom quite confusing and misleading to both 
city banks and individual holders of such checks. They print upon 
the margin of these checks which they draw upon their local bank the 
rather equivocal statement that they will be received upon deposit by 
the banks of their nearest clearing city — a statement which seems to 



362 PRACTICAL BANKING. 

carry^with it the idea that the city bank will unhesitatingly cash them 
on presentation, or receive them on deposit on the same footing with 
regular city checks. The holders of these checks are often disappointed 
to find that they are only checks on country banks which must be run 
through the usual collection mill at a cost, in some cases, of both time 
and money. 

DELAYED MAILS AND THE CLEARING-HOUSE. 

In places where the Clearing-Houses do the work of collecting checks 
the question often arises: What disposition shall be made of those 
checks which fail of reaching the banks in the usual season owing to 
mail delays ? This question comes up in a shape like this : 

A bank in New York sends to its Boston bank a daily letter, usually 
containing checks on Boston banks to the amount of many thousand 
dollars. This regular letter reaches the Boston bank, when the mails 
are not delayed, early in the morning, and in ample season to have its 
contents collected through the 10 o'clock clearing. A heavy snow- 
storm keeps the New York mail back, and this letter reaches the Boston 
bank at 11 o'clock. Now, what is the proper course of the Boston bank 
under the circumstances? It should be this : Its correspondent should 
at once be wired that their letter has arrived late, so that they may 
know its contents have not passed into the Boston clearing of that day. 
Then the Boston bank should carefully look over the contents of the 
letter, and, if there are in it any checks of considerable size, they should 
be at once presented to the banks upon which they are drawn for 
certification or collection — presented by the hands of Messengers, the 
same as they would have been in ante-Clearing-House days. 

This is the only sensible and safe course under such circumstances. 
CLEARING-HOUSE RETURNS. 

Once a week — in Boston on every Monday morning and in New York 
on every Saturday morning — the banks in the Clearing-House cities 
make a return of their condition, made up at the close of the preceding 
day. This is an average weekly return, based upon the average of the 
whole week's daily balances of the various items of loans, deposits, etc. , 
that are returned in this report. On page 363 is an exact transcript of 
such a return (see Form 85), as delivered to the Clearing-House Manager. 

The figures here brought together are, as it were, culled from the 
books of the bank, and in their preparation short-hand work is made 
of the task of getting at this summary by bringing into service the 
subsidiary book of return figures which I have fully described in 
another place. From the aggregate results of the returns of these 
individual bank statements a table of the returns of all its banks is 
made up by the Manager of the Clearing-House which shows at a 
glance the actual position of the whole line of the city banks at the 
close of the seven days covered by the summary. In the margin of 
this return a comparison is made between its figures and those of the 



THE CLEARING-HOUSE SYSTEM. 




k 1 "2 

A * j 

/ft « CO 



HO 



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o> 

CD 

a. 

CO 


94" 


CO 

t— 
CD 

-a 

cz 

CD 

CD 

—J 


1 

1 


Five 

Per Cent. 

Fund. 

- 


1 . 


Due from Banks 

other than 
Reserve Agents. 


1 
1 


Due from 
Reserve Agents. 


1 

1 


Due to Banks. 


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5©= 


Individual 
Deposits. 


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Circulation. 


1 


cz 
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363 










Form 85. 



364 PRACTICAL BANKING. 

statement of the preceding week. This table of comparisons, which 
shows the gains and losses made in reserve, deposits, etc. , is scattered 
broadcast over the country as an item of no little financial importance. 
When these returns are wired abroad they fly about in this shape. 
Here is a specimen (see Form 86), of one of these telegraphic summaries 
as received and distributed by a Boston banking house : 



MW YORK. ©AJtoJUx. &£ 18CJC 

Loans :.S6jlxjolouAjlj $&, If 50,000 

Specie ..^^xaxuju <=pO,500 

Legal-tenders S6jlxl^lx^6^ If 2^,7 CO 

Deposits 3bjLx_A_*^u6^ ....If, $ 7 1»,000 

Circulation ^j^cjk^uo^k^ 1+U, 5 O O 

Reserve ^^ca-jlxx^^ ^30,^00 

Richardson, Hill & Co. 



Form 86. 



OUR ENGLISH COUSINS. 365 



CHAPTER XXIV. 

OUR ENGLISH COUSINS. 

When in England, and while studying the methods and machinery 
of English practical banking, many novelties came under my attention 
and some that seemed to me deserving of particular notice I will 
present here. 

In the matter of gold coinage, I found that the Bank of England 
seemed to have a nearly complete monopoly of the business. To be 
sure, any person may take bar gold to the extent of £20,000 to the 
English Mint and have it, in time, returned to him in sovereigns and 
half sovereigns to the precise amount which he deposited. But in thus 
dealing directly with the Mint there are expenses and losses of interest 
which have to be taken into account, while the Bank of England will 
receive bar gold at £3. 17s. 9d. per ounce, and pay at once in new 
sovereigns or half sovereigns, and although this Bank of England 
paying-price for gold is slightly below its market value, the difference 
in question is so slight as to be more than offset by the Mint expenses 
I have mentioned. By its dealings in coin and bullion the Bank has 
the reputation of making £30, 000 a year. 

The English sovereign weighs 123.274 grains, and is a legal-tender 
so long as it does not weigh less than 122. 5. When of standard weight 
it contains 113 l-63d grains of pure gold. 

The English half-sovereign is exactly half the size and value of the 
sovereign. 

English silver and bronze coins are flat money — token coins — for 
their intrinsic value is materially less than their face value. 

The seignorage which Great Britain makes upon these subsidiary 
specimens of hard money forms quite a large source of Treasury 
revenue. Thus an ounce of silver, which is really worth 50d. , is 
manufactured by the English Mint into silver coins which will foot up 
66 pence. Here is a direct profit of ls k 4d. an ounce, subject only to 
the slight cost of manufacturing. 

But while English gold coins are a legal-tender to any amount, 
English silver coins are a legal-tender only to the amount of 40s. , and 
bronze coins to the extent of Is. 

Bullion brokers take quite a conspicuous part in London in the 
business of handling gold. Thus, when an American banker makes a 
shipment of mixed gold to London it is first passed through the hands 
of bullion brokers, who pass upon its weight and fineness, charging an 



366 PRACTICAL BANKING. 

established rate of commission for their work, and returning a formal 
account of sales. 

I found, too, considerable that interested me about the bank note 
of England. 

To the eye, Bank of England notes are a very plain bill — merely 
black printing upon white paper of the best possible quality. This paper 
is specially made for the bank, and is not only very strong but also a 
paper not easily burned. The visitor at the bank is shown notes that 
remain worthy of redemption after having been the victims of hot 
scorchings and fiery singeings. No Bank of England note is paid out 
the second time though it may have lived only to cross the street. In 
the sorting and canceling room, where hundreds of young men keep 
the air about them white with flying notes, the bulk of the circulating 
notes they were canceling by tearing off the signatures were as new 
and fresh in their appearance as if they had never traveled outside of 
the bank. After cancellation they are packed away in small wooden 
boxes in the vaults of the bank. 

The stock of notes on hand and thus ripening for destruction in the 
bank fills ten or twelve thousand of these little boxes and amounts to 
perhaps $8,500,000,000, although the notes are taken from the vaults 
and burned in a furnace when they have had five years' storage. 

The Bank of England note is very popular with financiers on 
account of its splendid workmanship and excellent paper and, more 
than that, its soundness as currency. 

They are a legal-tender everywhere and by everybody in England, 
with the singular exception that they are not a legal -tender by the 
Bank of England or any of its branches. 

English country bank notes are not legal-tender. 

Where Bank of England notes are used as legal-tender in payment 
of debts the debtor cannot oblige the creditor to return change. 

In presenting for redemption Bank of England notes at the counter 
of the Bank of England or any of its branches, sovereigns may be 
demanded, but not half-sovereigns or silver, and its notes which may 
have been wholly or partially destroyed, will be redeemed if satis- 
factory proof can be furnished the Bank that the missing paper has 
been destroyed. 

In sending bank notes by mail the Englishman generally cuts them 
in halves, takes a careful record of their marks and numbers, and 
sends one of the halves by registered mail, the other by ordinary post. 

The loser of Bank of England notes may "stop " them at the Bank; 
but it is a curious fact that he must pay 2s. 6d. for every "stoppage " 
thus made. And such "stopping" may not amount to much, since 
the notes in question are perfectly good in the hands of any innocent 
holder, ' ' stopped " or not ' ' stopped. " 

The Bank of England has such a well-nigh complete monopoly of 
the business of circulating paper money in the United Kingdom, that 



OUR ENGLISH COUSINS. 



367 



many people hardly seem aware of the fact that paper issues are made 
there by any other banks. Even many Englishmen themselves appear 
to be scarcely aware that England has any other bank-note than the 
Bank of England note, for I have seen, in a standard English encyclope- 
dia, this definition of a bank note : "A promissory note issued by the 
Bank of England, and payable on demand;" and I asked a London 
bank clerk (one of 14 years' service) if there were any bank-notes issued 
in England or Wales other than the Bank of England notes, only to 
receive a reply in the negative. 

But here is how this matter really stands. Perhaps most persons 
know that the Scotch and Irish banks have a paper issue of their own, 
but many do not seem to understand that there are both joint-stock 
banks and private banks in considerable numbers, both in England 
and Wales, that issue bank notes. 

By the Act of 1844, no bank in any part of the United Kingdom 
which did not at that time issue notes was allowed thereafter to exercise 
that privilege, and by an Act passed that same year in reference to 
joint-stock banks, so many restrictions and limitations were introduced 
as to practically forbid the starting of any new banks. But within a 
comparatively recent period the Limited Liability Act has given more 
latitude in the matter of setting up banks. 

Of the joint-stock banks of England and Wales, of which there are 
120, 56 in the provinces are entitled to issue notes to the extent of 
£2,738,640; but their actual issue is considerably less. There are 255 
private banks in England and Wales, of which 57 are in London. One 
hundred and seventeen of these private provincial banks have an 
authorized issue of £3,874,621. 

To give an exact idea of the way the paper circulation business stands 
to : day in the United Kingdom I here furnish a late circulation returns 
of the joint-stock and private banks of the country : 



Sept. 19. 



Aug. 22. 



Bank of England. . 

Private banks 

Joint-stock banks. 



Total in England. 

Scotland 

Ireland 

United Kingdom. 



£34,667,598 
1,305,764 
1,433,314 



£27,406,673 
5,638,129 
5,529,296 



£25,325,000 
1,341,087 
1,468.420 



£28,134,507 
5,568,068 
5,675,766 



£38,574,098 | £39,378,341 



Increase. 



Decrease. 



£70,061 



£70,061 



£657,405 
35,323 
35,106 



£727,834 



146,470 



£874,304 



The English private banks are below their fixed issue £2,107,036 

The English joint-stock banks are below their fixed issue 921,475 

Total below fixed issue in England £3,028,511 

The Scotch banks are above their fixed issue 2,961,779 

The Irish banks are below their fixed issue 825,198 

The amalgamation or failure of banks which haa the right to issue 

circulation has been one cause that has led to the difference of over 



368 PRACTICAL BANKING. 

£3,000,000, as stated above, between the authorized and actual circu- 
lation of these private, and joint-stock banks. But this has not 
resulted in a corresponding and dangerous reduction in the total 
circulation because the Act of 1844 provided that the Bank of England 
should be allowed to issue additional circulation to two-thirds of the 
amount of reduction from, such causes. The profit the Bank derives 
from its issue department is the interest received upon the £14,000,000 
of Government debt and securities, which, at the rate of 3 per cent. , is 
£420,000 a year. 

Thus far, in this chapter, the Bank of England has had a prominent 
place and I will briefly mention a few descriptive facts which may aid 
the reader to realize this bank's importance in English money matters. 
In its service there is a small army of well-trained clerks, for this insti- 
tution, with its capital of ninety millions of dollars, and dating back 
to 1694, to-day employs 1,000 men. The building in which these clerks 
do their work covers five acres of ground. It has not a single window 
upon the street, the light of day being admitted through open courts. 
It has a clock in the centre of the bank with fifty dials. The Bank of 
England is situated in the centre of London, but it has one branch at 
the West-End of the city, and many branches in the provinces. 

The amount of Bank of England notes afloat generally averages 
about £20,000,000, and its deposits, out of which it of course makes a 
great deal of money, range from £12,000,000 to nearly twice that sum. 

Another financial instrument in which the American visitor to Eng- 
lish banks takes much interest is the ' ' crossed " check. These are in 
the most general use in England. While in London 1 had occasion to 
mention to some English bankers that we did not use the crossed check 
at all in the United States, and that our financiers knew so little about 
them that the majority of them — in fact, very few of even professional 
bankers — would know a crossed check if shown one. The Londoners 
were much surprised at this statement, and could not see how we could 
possibly get along without the use of checks of this sort. 

The universal employment in England of this crossed check enables 
payers to remit checks in comparative safety, in face of the fact that 
Parliament long ago freed the banks from all obligations to procure 
identification of parties presenting common checks for collection. 

A crossed check is simply one that has upon its face marks which 
signify that it must be presented through some other bank or banker ; 
and checks of this description will not be cashed if they reach the bank 
upon which they are drawn by any other path. They are absolutely 
worthless for presentation in the hands of the wrong parties. This is 
not simply a matter of usage, for an Act of Parliament forbids a banker 
to give money over the counter for a crossed check drawn on him. 

The favor with which this method of manipulating checks is 
received in London business circles is indicated by the practice which 
so generally prevails among the charitable societies, and subscription 



OUR ENGLISH COUSINS. 



agents, of instructing donors to cross all the checks which they remit. 
An advertisement of the London Relief Association reads: 

Cheques and post-office orders should be crossed "Hemes & Co.," and made 
payable to J. H. Allan, Esq. 

For specimens of London checks see Forms 87, 88 and 89 — two of 
the crossed type and one of the common order — simply a check to be 
collected in anyway the holder elects. The first is an ordinary crossed 
cheque which must come to the London & Westminster Bank through 
another bank. The two lines with "& Co." between them constitute 
the crossing; or, the lines without the "& Co." will do as well. 



o^*%^ Qcfest^/ff*. 



tf£*, c^^^-^^y^ 



(Sty- ■—T-y^' ~/5 ? /L++rns 




JaaJ- 



AAJ-eACUu jr-ov-u ^L^ 



y^-^ X7a^A>> 



cC^. 



•3. 



jr^/yearer 



~~^£&^i7 s<LjL(l£cc^ 



o_^2_ 



*& 



J~~-ro — 



fftjxt'6) 



— *\S) . z/Ct^v a£ 



Form 87. 

When the drawer knows the name of the payee's banker he inserts it 
in his crossing as in the next illustration (see Form 88) which is a 
check crossed specially. This check will be paid by the London & 
Westminster Bank to Messrs. Grlyn & Co., only. 




Form 88. 

Finally, on page 370 will be found a ccpy of the ordinary, open 



370 PRACTICAL BANKING. 

cheque (see Form 89) which can be paid by the bank to anybody who 
presents it. 



^ 





Form 89. 

1 will briefly mention some points in English bank practice which I 
noted as worthy of attention. 

English banks and bankers generally furnish their customers with 
check-books, making no charge for them. Near the end of each check- 
book so furnished, a blank order for a new one is printed so as to 
remind the owner that it is time for him to send for another book. 

This custom may have grown out of the desire on the part of the 
Ibanks, which I have found quite prevalent, that their customers should 
use a uniform check, so as to reduce the liabilities to frauds and 
forgeries. 

When an Englishman receives a check which is not dated he is 
quite apt to insert what he believes should be the correct date and 
place his initials under the same. The Bills of Exchange Act of 1882 
appears to give him authority to make this insertion. 

English bankers have a custom of considering a check out of date 
if the date is twelve months or more old, and of refusing to pay such 
checks. 

Under English law the holder of a check which has been drawn 
payable to bearer may change it to a payable-to-the-order-of any 
person, but he cannot change one from order to bearer. This last 
change can only be made by the drawer, and if he makes such a 
change he must put his initials under the alteration. This initializing 
method is not a practice in this country. 

English bankers do not deem a pencil endorsement illegal, but 
refuse such generally (if they can) because they are so easily removed, 
.and so easily become illegible. 

In cashing checks payable to bearer English bankers are not 



OUR ENGLISH COUSINS. 371 

required to pay any attention to their endorsements. In cashing 
checks payable to order they are only required to see that the checks 
appear properly endorsed. In neither case are the banks required to 
secure an identification of the party for whom the checks are cashed. 
Parliament some years ago enacted a law relieving the banks of any 
responsibility in this matter of identification. London bankers and 
merchants told me that it would be impossible for London to get 
through its daily check paying business were identifications demanded, 
and they wondered how we managed to pull through with an identi- 
fication system still in vogue. 

I have seen the Paying-Cashier of the Bank of England cashing 
checks for a long line of customers as rapidly as he could throw out 
the notes and change, paying little attention to the persons of the 
actual presentors — only pausing to see that order checks had, on their 
backs the right names, while bearer checks received only a face scanning. 

London bankers require special guarantees for stamped endorse- 
ments, because, they say, anybody may get hold of the stamps and 
use them. 

Where the initials of the Christian name of an endorser agree with 
his full name they are readily accepted. Thus R. D. Smith will be 
accepted for Richard Dorman Smith. 

English bankers term a man who makes his mark in lieu of a regu- 
larly written signature a " marksman " — a rather curious use of a word 
which is always used in a different sense in this country. Their methods 
of getting up a ' ; signature " by a mark is the same as with us — a method 
in fact which we have directly copied from them. Thus : 

TRjgJxjlaJ: ^ JLgu^-jla, 

|A( Ajt>^_ft_Ao6>. : ^L<XjUA_fi-jk c^LxoCtiv, i^.O U\-ft-a_fl-Ajjt Q^JZA_fl_Jut, cJ^jGlj^AjGlJO^. 

Procuration endorsements and signatures are largely in use in Eng- 
lish business circles, though they are never accepted in real red tape 
circles without an accompanying bank guarantee. P. P., or per pro., 
are the usual forms for expressing endorsements, etc. , of this sort. 

Where endorsements of payees of checks, drafts, etc., are not forth- 
coming for one reason and another, banks have a custom which is 
common with us of allowing such vouchers to be deposited with them 
on a substitute for an endorsement of this sort: "Received payment 
and placed to the credit of so-and-so," the signature of the bank receiv- 
ing the same being attached. 

It is the custom in many of the English banks to pay such checks 
of a customer which come in through a morning's clearing as are within 
the amount of his balance and to return the rest. This is a method 
which I have decidedly condemned when discussing this point else- 
where. I now find that the Bank of England treats a failing balance 



372 PRACTICAL BANKINO. 

precisely as we have advised. Where a customer's credit balance is 
insufficient to meet all the checks which pour in upon it at clearing 
the Bank of England pays none of them— sends them all back through 
the clearing, with the "N. S." report upon them, a label which, in 
English banking, means "not sufficient funds." 

Another English banking abbreviation is "R. D.," meaning about 
the same as "no funds," but literally translatable "Refer to Drawer," 
and a check, on which the figures vary from the words, would usually 
be returned marked with the curt phrase, "words and figures differ." 

London banks endeavor to hunt up drawers of checks which reach 
them through clearing in a technically incorrect condition, and thus 
try to have them put right without a recourse to endorsers and drawers 
through the Clearing-House path. 

When an English banker wishes to be advised by wire or post 
whether a check is paid or not paid he says, " Wire (or write) its fate." 

The habit of using alcoholic stimulants is recognized by an English 
banking custom which requires witnesses to signatures and to payments 
of cash on checks drawn by persons under the influence of alcohol. 

English banks do not certify checks. 

There is no grace on sight drafts in England. 

Bills due on "bank holidays" are payable the day after. Those 
due on Sunday, Good Friday, Christmas Day, and regularly proclaimed 
days of fast and thanksgiving, are payable the day before. 

The London method of treating pass-books is somewhat different 
from ours. I have elsewhere described this London style. 

All customers' checks are finally returned to the drawers after they 
have acknowledged them to be correct and have receipted for them. 

Every English check must bear a penny stamp no matter for how 
small an amount it may be drawn. 

HUSBANDS AND WIVES. 

In England a married woman cannot open a bank account unless 
she has, in writing, the formal consent of her husband ; neither can a 
woman who has opened an account with an English bank while she 
was a single person withdraw that money after she is married unless 
she has the approval of her husband. 

STARTING A BANK IN LONDON. 

There are some features of such a movement that differ slightly 
from the States' way of doing the same thing. The professional 
promoter is generally called into use at an early stage of the business. 
Yet the promotion business has, of late, become such a loud financial 
scandal that banks, in starting to obtain subscriptions to shares, have 
felt called upon to state that no money is to be paid to promoters. 

An advertisement of one new London bank, which I have before 
me, states: " No promotion money has been paid, or will be paid, the 
only contract entered into on behalf of the company being one between 



OUR ENGLISH COUSINS. 373 

Robert Turner Rhode and Thomas Colman for advertising the 
prospectus. " 

What organizer of a big bank in an American city would think of 
printing such a notice as this ? 

London bank shares are sometimes fixed at £10 each ; sometimes 
£20. 

It is quite common for the new bank to allow 5 per cent, interest 
on stock payments made in advance of the call. 

English branch banks have quite often local boards or committees, 
under the control and direction of the central board. 

Applicants for the new shares are usually required to deposit £1 
per share subscribed for. 

Here are a couple of advertisements which have an interesting 
bearing upon the business of floating companies and securing Directors : 

TWO HUNDRED AND FIFTY POUNDS WANTED, IMMEDIATELY, FOR A 
few weeks, for preliminary expenses of floating a railroad company with a very 
influential Board and Government endorsement. Either one lender, or several lenders 
as a syndicate. Liberal bonus paid with loan immediately after allotment. Apply 
Company, 117, Chancery-lane. 

IRECTOR.— A GENTLEMAN, WITH FROM £500 TO £1,000 AVAILABLE 

capital, can be received on the Board of a well-established company, which has 

paid dividends for the past four years. Moderate fees and 6 per cent, interest on 

investment. Apply, by letter only, Y 23, Address and Inquiry office, The .Times, E.C. 

BANK SHAREHOLDERS' MEETINGS. 

I have elsewhere spoken of the generally somewhat farcical character 
of shareholders' meetings — of the difficulty experienced in securing a 
decent attendance at them in common times, and of the routine and 
red-tape style in which their doings are apt to be transacted. These 
characteristics are somewhat in contrast with the way the shareholders' 
meetings of the great joint-stock banks and discount companies of 
London are conducted. There the general course is to prepare a good 
sized hall for their stockholders' meetings, for shareholders in London 
seem to have a commendable habit of attending these meetings. 

It is just possible that the custom of having a free lunch at these 
gatherings may increase the attendance. This lunch is served just 
before the meeting. 

"Yes,'' said a London bank man to me, "it is much the best to 
have a good lunch before the meeting, since such a lunch is sure to 
improve the harmony of the stockholders. " 

At the meetings the prominent and able banker who takes the chair 
generally makes a long and formal address, relative not only to the 
business of the bank during the last half year and general prospects of 
the bank for the next six months, but also filled with reflections and 
suggestions regarding the general financial situation at home and 
abroad. He is generally followed by other influential speakers, or, his 
report upon the doings of the bank may, and quite often does lead to 
a discussion, in which prominent shareholders take an active part; and 



374 PRACTICAL BANKING. 

I observed, that in some of these stockholders' meetings, held after a 
run to a dividend that had been checkered by losses, discussions of a 
pretty sharp character took place. 

Reporters attend these London stockholders' gatherings, and the 
next issues of the leading London papers contain all the facts, figures 
and speeches presented. The publicity of these meetings, and the way 
they are reported in the press, are peculiar features of London banking. 

Herein is a change from customs formerly prevailing in these 
premises. It is not until comparatively recent times that the Bank of 
England made any public returns of its condition. It used to refuse 
point-blank to show its hand ; and neither the people nor Government 
could force the old Bank to make any statements regarding its circu- 
lation, deposits, reserve, etc. Now it prints a full and clear weekly 
statement of its condition. 

After the meetings, in the evening, there is a big dinner, to which 
Directors, Managers, etc. , and distinguished guests are invited. 

CONSOLS. 

These certificates, which represent the vouchers for the consolidated 
debt of England — the word being an abbreviation of consolidated — are 
steadily quoted in the money articles of the London press — and some- 
times in this country as well — in a way which is rather confusing to 
the average American reader. The record of the monetary day of 
London, so far as it touches on consols will read thus, the quotations 
varying constantly, of course. We quote from the London " Times " : 

'• Consols are unchanged at 94% for cash and 94% for November settlement." 
This record I happen to quote from the * ' Times" of October 21st. 

A sale for cash is an easily understood matter. That of course 
means payment at once. But the second quotation refers to sales ' ' for 
account, " as the English phrase is, and in that case it is understood 
that they are to be paid for on the next ' l settling " day for consols, 
which is the first of the next coming month. 

On the London Stock Exchange there are special settling days for 
securities of all sorts, including transactions in foreign exchange. 

BANK PROFITS. 

I have been often asked how it is these great London banks, with 
their enormous expenses (£150,000 in six months in one case) and their 
habit of paying interest upon deposits, and in face of the fact that 
discount rates are low, can make such enormous dividends— say from 
7 to 20 per cent, a year — besides carrying heavy sums to the "rest" 
accounts. This question I can easily answer, having specially looked 
into this point. 

These great and successful banks have enormous deposits. They 
have two classes of accounts — demand deposit accounts which are 
open steadily for reception of deposits and payment of checks and 
upon which they pay no interest, and time deposits upon which they 



OUR EN&LISH COUSINS. 



375 



pay low rates of interest. The first-named accounts, in the great 
banks, are very numerous, and carry handsome daily balances, making 
up an average line of deposits which are of great value, and which the 
bank can depend upon in making discounts. 

Some of these banks allow overdrafts, upon which they charge 
pretty stiff interest rates. "And," said a Londoner to me, "our banks 
have a habit of charging their dealers pretty well for everything they 
do for them." 

Here is an interesting table of recent date giving the figures of the 
large London banks, which is so made up as to illustrate some of my 
statements, and which also permits a comparison of the business and 
profits of the city banks having a comparatively local business with 
those which also do a country business through branches. 



Citt Banks. 



London & Westminster, Lim — 

London Joint Stock, Limited 

G-lyn, Mills, Currie & Co 

Union, Limited 

City, Limited , 

Imperial, Limited 

Alliance, Limited 

Consolidated, Limited 

Central, Limited 

London & South- Western, Lim, 
Total, ten banks 



Deposits. 



City Banks with Country Bra 

London & County, Limited 

National Provincial, Limited 

Lloyds, Limited 

London & Provincial, Limited... 

Capital & Counties, Limited 

Total, five banks 



£25,694,000 

11,885,000 

14,848,000 

14,204,000 

6,014,000 

3,646,000 

4,656,000 

3,640,000 

1,708,000 

4,879,000 



Capital 
paid IN. 



£2,800,000 
1,800,000 
1,000,000 
1,705,000 
1,000,000 
675,000 
800,000 
800,000 : 
156,250 ! 
400,000 ! 



o a 



! § • 

go 



s » 



£20 
15 

10 
15 
10 
4 
5 
20 



16% 

12K 

iox 



10 
10 



£42 
40 

42^ 
24K 

17 

UK 

42 



£91,174,000 | £11,136,250 



NCHES. 

£33,804,000 

39,311.000 

17,357,000 

5,578,000 

9,789,000 



£105,839,000 



I 
£2,000,000 | £20 

420,000 10X 
1,807,500 | 12 

1,300,000 8 



400,000 
800,000 



20$ 

20 
20 

14K 

18 



£6,727,500 ; 



£93 

48 
55 

29' 
20 



In addition to capital the first ten banks have a surplus of £5,600,000, and the 
five following banks have a surplus of £4,230,000. 

SOME EXCELLENT IDEAS. 

When I first went to England I had somewhat of an idea that 
English bankers were perhaps a little slow and old-fashioned. I did 



376 PRACTICAL BANKING. 

find that in some matters they were following exactly the same 
methods that were in use two or three hundred years before ; but as I 
could not see how those methods could be improved I concluded that 
an old-fashioned idea might yet be a good one. Further acquaintance 
with their customs taught me that many of our best business methods 
here were simply imported from there, and I found still other of their 
ideas and ways in carrying out the details of vast mercantile and 
financial transactions which might be profitably introduced here. 

In this connection I will speak of the Institute of Chartered 
Accountants as one of these old-fashioned British organizations which 
should be copied in this country. 

There is one feature of the management of the Institute which it is 
proposed by our American Bankers' Association to incorporate into its 
plan for associate membership in that association, and that is a system 
of what may be termed, civil service examinations of bank officers. 
The English society holds a preliminary examination, an intermediate 
examination, and a final examination in the month of December of 
each year, each of which lasts three days. Persons who propose to 
present themselves for these examinations are required to give at least 
thirty days' notice. These examinations are held at the Copthall 
Buildings, London, E. C. 

Then, in London there is a large and strong organization, termed 
the London Bankers' Protection Society. When bank thieves, forgers, 
etc., are detected, the attorney of this association is pretty sure to 
appear as the principal, or aid, in their prosecution. And the organi- 
zation is also active in offering rewards for the detection of counter- 
feiters, forgers, etc. 

Institutions of this character, which exist in many English cities, 
should be more generally established here. We have some of them, 
but there are altogether too few of these organizations existing. 

Wherever there is a town or city in the United States having several 
banks, those banks should unite in a plan having for its object the 
common protection of each and all from frauds and thefts. 

Both in England and in this country there has been a custom of 
late years with many of the largest and best managed banks of insuring, 
through well-established guarantee companies, the fidelity of their 
entire corps of officers, on the favorable terms which can by this method 
be made with the fidelity companies, and paying the cost of the policies 
at the expense of the bank. This is a practice deserving of high com- 
mendation, and doubtless the time is rapidly approaching when it will 
be very generally adopted by the banks of the United States. 

There is another bank-insurance step not uncommon with the 
English banks, but which is hardly known in America. There are 
banks in London and elsewhere in Great Britain which arrange schemes 
of life insurance for their entire staffs of clerks with first-class life 
insurance companies, paying either the whole or one-half the cost of 



OUR ENGLISH COUSINS. 377 

the policies taken out. By such action as this, the banks show a 
humane interest in the welfare of their officers and those dependent 
upon them, which must strengthen the confidence of the employees in 
the management of the institutions they are connected with and 
deepen the ties of devotion to their best.interests. And such generous 
insurance has also a tendency to turn the mind of the insured from 
thoughts of those speculative schemes so often entered into by the 
bank officer, who sees little hope of putting by from his wages a proper 
provision for the future of those who are dependent upon him and his 
earnings. 

As I have thought of this insurance matter and of its adoption 
among our banks, it has seemed to me as if the officers in banks having 
a large staff of clerks might combine together and insure their own 
fidelity through their own bank organization ; or the officers of all the 
banks, in a large town or city, might unite in a mutual fidelity insur- 
ance organization. 

Perhaps the insurance system in vogue at the Bank of England is 
as good a model of an organization of this character as exists any- 
where. Every officer of that bank is obliged, on entering its service, 
to give the bank a fidelity bond of a thousand pounds. The lowest 
sum for which a London Fidelity Insurance Company would furnish 
such a bond would be £5 a year. But the clerk of the Bank of England 
pays this £5 a year into a guarantee fund, which was, many years ago, 
established by the bank itself — in effect, takes of his own bank his 
fidelity policy or bond. All the profits of the business are steadiy 
added to the fund, and, at the date of the last reports of the bank, it 
amounted to £50,000. The losses of the bank through the dishonesty 
of its clerks since 1845 up to the date of this report had been only two 
or three thousand pounds. The income from this fund is wholly used 
for relieving the necessities of the widows and orphans of former 
officers of the bank. All its officers are, therefore, directly interested 
in increasing it. And with this end constantly in view, it becomes a 
matter of duty with them, not only not to endanger this fund by their 
own unfaithfulness, but also to be ever on the alert to see that fellow 
officers do not steal from it by stealing from the bank. 

The Bank of England has had upon its Boards of Management, 
during the period over which it is easy for the financial student of to- 
day to extend a direct observation, some of the strongest and most 
experienced financiers and merchants of London ; and it is, as a purely 
business institution, probably managed with more business ability 
than any other bank in the world. 

But, after all, that feature of its administration which commands 
the most earnest admiration of thoughtful bankers is the one which 
characterizes its treatment of its subordinate officers. It is quite in 
the habit of taking a paternal — a humane — interest in all its employees. 

The men who have been Governors of the Bank of England, in 



378 PRACTICAL BANKING. 

modern times, at least, have been noble specimens of the Christian 
business man — the gentlemen who to-day occupy that position being 
most worthy successors of many others of the same type. 

Here are some of the ways in which the Bank of England shows a 
noble interest in, and care for, the welfare of its thousand officers, and 
which I mention because they also are a part of the methods which I 
believe may with profit, be copied by some banks in this country. 

At a recent convention of bankers in Saratoga, an accomplished 
bank officer, in a paper on a model bank — a paper of ability and 
interest — pictured a systematic pension system as one of the features 
of his model banking institution. 

The Bank of England pensions those of its clerks who have served 
the bank in a faithful manner for a certain length of time, and this 
method in its administration has worked admirably. 

It is not alone in this practice of looking after the interests of faithful 
employees. Other London banks as well as those of some other Eng- 
lish cities, have their superannuation schemes by which provision is 
made for the comfortable retirement at an advanced age of those bank 
clerks who have by long and faithful service worn themselves out by 
hard work, and who have certainly won a title to a pension for the 
rest of their lives from the employers whom they have so well served. 

It has often been urged that our banks — particularly those in the 
great cities which have large staffs of clerks — might, with profit, look 
a little sharper after their physical health and comfort — that is, might 
possibly extend a little closer supervision over them, as regards these 
points, while they were under their direct observation. 

The Bank of England has its medical superintendent, an eminent 
physician, who attends at the bank one hour each day, and who is 
employed by its Directors in all matters directly connected with the 
health of its employees. Every clerk, before receiving his commission, 
is examined to see whether or not he is well enough and strong enough 
for bank work. Clerks who absent themselves on account of illness, 
are visited at once by the bank physician. Clerks applying for absence, 
on account of illness, are examined by the physician. If a clerk com- 
plains that his special work is injurious to him, the bank physician 
looks into his case, and, if practicable, relieves him by ordering a 
change of duties. 

The bank has also provided for its officers — officers whose daily 
routine of work extends from 9 A. M. to 5 P. M. — the best-appointed 
bank lunch room I have ever visited. 

It grants frequent extra holidays to old and faithful officers, promotes 
systematically, and makes extra grants of pay to its clerks in years of 
exceptional prosperity. 



TRUST COMPANIES. 379 



CHAPTER XXV. 

TRUST COMPANIES. 

Although we are supposed to be considering banking it is highly 
proper that the trust companies should receive some attention, for they 
come so near being banks that the National banks who have found 
them such dangerous and successful competitors for business are often 
found asserting that they are neither more nor less than banks — State 
banks sailing under State charters. The remark is often heard that 
depositors put their money in trust companies because they are trust 
companies, established to hold, in trust, moneys, and to invest the 
same in certain restricted securities of the most unquestionable 
character. But those best acquainted with both National banks and 
trust companies know well enough that both classes of institutions 
where they are properly managed, invest their deposits, capital, etc. , 
in about the same class of securities, and are equally careful and con- 
servative in the matter of their loans. To be sure the trust companies 
move along under certain State-made restrictions as regards the 
character of the investments they may make — restrictions which were 
framed for the purpose of protecting the "trust funds" which they 
hold. But along-side these trust companies' State defenses may be 
placed the checks and guards against improper and dangerous loans 
set up by the National banks, which are of a very conservative and 
sagacious character. 

Trust companies often claim that they are not banks because they 
do not solicit or desire accounts with merchants, and that they are not 
in any sense the "wings of commerce," which regular banks have 
always been euphoniously termed. If they are not entitled to be so 
called they certainly have claim to the credit of furnishing a good deal 
of power to the legitimate wings of trade, and, in the matter of current 
accounts with their dealers, they do a deposit-receiving and check- 
paying business so like the National and State banks proper that they 
are hardly to be distinguished from them. 

With these facts in view it will not take an intelligent financier 
very long to come to the conclusion that the difference between the 
two classes of institutions, as far as the question of which is a bank 
and which is not a bank is concerned, is more technical than real. 

Coming back to the point named at the opening of this paragraph, 
I remark, that the reason careful men deposit their money in the 
average trust company of the period rather than in the average National 



380 PRACTICAL BANKING. 

bank is generally because the former pays more liberal interest upon 
deposits of all classes. 

In Massachusetts, where the modern trust companies have had a 
remarkably successful career, an attempt has been made on the part 
of the regular banks to procure the enactment of a law compelling 
them to keep on hand in their vaults stronger reserves, of a character 
somewhat similar to those required of the National banks by the terms 
of the Bank Act under which they live and act. In making this 
move, the point was taken that trust companies are really banks with- 
out circulation. 

This work has not foi its mission the discussion of theories or 
the advancing of any partisan views on financial matters, and for 
these reasons no attempt will be made to present the pros and cons of 
this exciting trust company reserve question. Bankers and trust com- 
pany managers, who wish to pursue the matter, can have easy access 
to a valuable argument in favor of requiring the trust companies to 
carry heavier home reserves which has been made by R. D. Smith, 
Esq. , of Boston, and which has been published in a pamphlet ; and 
they can as easily reach the printed reply to the Smith argument made 
by an able financier, who is the manager of a large trust company. 

In States where statutes provide that grace shall prevail on time 
paper other than checks on banks, the question whether a trust com- 
pany is a bank according to the statutes becomes one of importance. 

It has not been held by these Massachusetts authorities that these 
companies are banks in the eye of the law covering the question of 
grace and other points, though they possess many of the functions and 
privileges of banks. 

Trust companies, therefore, have as much right to take grace as 
individuals or corporations other than banks. 

Trust companies have greatly increased in numbers and business 
within the last ten years, and the leading companies of our times are 
strong and well-managed institutions ; and they have made consider- 
able money, in most cases, for the fortunate shareholders of their 
comparatively small capitals. As the leading trust companies are 
to-day doing an immense banking business of one class at least — that 
of paying daily a vast number of customers' checks upon their deposits 
— it appears every way desirable, looking at the matter from a public 
standpoint, that they should settle through clearing when they are 
located in Clearing-House cities. Under the out-of-clearing method 
of cashing checks (drafts, the trust companies persist in terming 
them) the messengers of banks, who are the largest collectors of these 
checks, and the general public, into whose hands many of them pass, 
are put to a vast amount of trouble, which is all obviated where 
the checks of trust companies are made chargeable through the 
Clearing-House. 

The present relations of the large trust companies to the National 



TRUST COMPANIES. 381 

banks in our Clearing-House cities are of such an important character 
that they are of a good deal of interest to the financial observer. Out 
of the connection there may, under some circumstances, be a develop- 
ment of no little financial trouble. 

These trust companies scatter among the National banks around 
them (those banks that are willing to pay a liberal interest upon large, 
round demand deposits) such of their resources as are accumulating 
on their hands awaiting investment, or funds which they do not deem 
it prudent to place beyond their immediate reach. In times of great 
stringency — of panic — these trust balances must be suddenly reduced 
at the very time when they are most needed "by the banks, as this is 
always the case with demand deposits. The control of the balances in 
question may, it is often urged, be in the end a source of danger to the 
National banks, since in their presence lies a temptation to undue 
extension of bank time loans. 

It has been said that the "success of the leading American trust 
companies has been most marked. This success was a result of the 
adoption of ideas and methods which had their origin in England. Our 
great trust companies are^ in their most important features, like the 
joint-stock banks of London. They have, like them, a way of doing 
an immense business on a small share capital. The writer found the 
great joint-stock banks of London carrying, on the average, lines of 
deposits equal to about ten times their capital, and making out of this 
wholesale business of buying and selling vast amounts of money most 
enormous dividends for their .fortunate shareholders. 

Already, in this volume, has been given in detail London dividend, 
capital and deposit figures. Here with the trust companies, as there 
with the London banks, ' ' large ales and small profits " has proved a 
very successful motto in the two classes of banking under discussion. 

Wishing to give in detail some clear idea of the way trust companies 
work — an explanation of trust company methods of machinery — let us 
take for explanatory illustration a view of one of the best and most 
successful of the trust organizations. It has a capital of $500,000 and 
deposits of over $12,000,000 : 

This company is authorized to receive and hold moneys and property in TRUST 
and on deposit from Courts of law or equity, executors, administrators, assignees, 
guardians, trustees, corporations, and individuals, AND MAY BE APPOINTED BY 
PROBATE COURTS TRUSTEE UNDER ANY WILL, UPON SUCH TERMS 
AND CONDITIONS AS MAY BE AGREED UPON. 

It is by law made a legal depository of money paid into Court by the parties to 
any legal proceedings, or which may be brought into Court by reason of any order or 
judgment in equity or otherwise. 

It will act as TRUSTEE OF MARRIED WOMEN, and take charge of and 
manage their separate property. 

It offers to the public the advantages of a guarantee capital of half a million 
dollars, specially invested by requirement of its charter, AND A PERPETUAL 
SUCCESSION. 

It also acts as TRANSFER AGENT FOR RAILROAD and OTHER STOCK 



382 PRACTICAL BANKING. 

CORPORATIONS, and as agent for the purpose of issuing, registering or counter- 
signing the certificates of stock, bonds, or other evidences of debt, and for the 
payment of dividends and interest of corporations, associations, municipalities, State 
or public authority, and also as agent or attorney for the care and management of 
invested property, and for the collection of dividends and interest. 

DEPOSITS may be made at any time, and INTEREST will be allowed on daily 
balances of $500 and upward. 

The company reserve the right at any time to change the rate of interest allowed 
on deposits. 

In the management of its deposit business, here are a few points : 

All deposits made later than one o'clock are placed on interest the next business 
day. 

It pays 3 per cent, on demand deposits of over $500, reserving the right to require 
five days' notice for payments of $20,000 and upwards on any one day. 

On deposits made for a specified period of six months or more, it makes special 
rates. 

All deposits must be accompanied by a memorandum describing the items 
separately. 

Interest not allowed on temporary deposits if drawn in thirty days. 

It particularly requests that checks and drafts not on banks in its own city should 
be deposited by one o'clock or earlier, so that they may be forwarded for collection 
the same day. 

Office hours, 10 o'clock until 2 o'clock. 

In the matter of its investments, here are provisions of its act of 
incorporation and by-laws: 

It shall be lawful for said corporation to invest its capital and all the moneys 
entrusted to it, or in any way received by it, in the authorized loans of the United 
States, or of any of the New England States, or cities or towns of this Commonwealth ; 
in the stock of National banks organized within this Commonwealth ; in the first 
mortgage bonds of any railroad company which has earned and paid regular dividends 
for two years next preceding such investment, or in the "bonds of any such railroad 
company as is unincumbered by mortgage, or in the stock of such railroad companies 
incorporated by this State ; and the said corporation may make loans upon mortgages 
on real estate within this Commonwealth, or upon the notes of corporations created 
under the laws of this Commonwealth, and the notes of individuals with a sufficient 
pledge as collateral of any of the aforesaid securities ; but all real estate acquired by 
foreclosure of mortgages, or by levy of execution, shall be sold at public auction 
within two years of such foreclosure or levy. 

It shall be lawful for the said corporation to invest its capital, and all moneys held 
by it in trust, in the authorized loans of any of the counties, cities or towns in any of 
the New England States, or to loan the same to this Commonwealth, or to any county 
city or town therein ; and said corporation may also invest such capital and moneys 
in any other securities in which Savings banks now are or hereafter may be allowed to 
invest, and shall be subject to and governed by the provisions concerning Savings 
banks which are contained in the General Statutes. 

DIRECTORS. 

The Board of Directors shall consist of a President, three Vice-Presidents, and 
fifteen Directors, who shall be chosen annually by the stockholders, by ballot, and 
who shall continue in office until others are chosen in their stead. 

The actuary shall, ex officio, be a member of the Board of Directors. 

Vacancies during the year shall be filled by election by the Board of Directors. 

The Board of Directors shall appoint an Actuary, a Secretary, and such Clerks as 
they shall from time to time think necessary, who shall respectively hold their offices 



TRUST COMPANIES. 383 

until removed by the Board of Directors. They shall also determine the powers and 
duties of the officers of the corporation, fix all salaries, and take such bonds or other 
securities from any officer as they see fit. 

The Board of Directors, by themselves, or by committees, shall have the general 
management, control and direction of all the business concerns and affairs of the cor- 
poration, and of all its trusts and undertakings, with full power to make all investments 
and to transfer all real and personal property belonging to or in the charge or control 
of the corporation at their discretion. 

They shall have power to declare all dividends, determine upon the form of certi- 
ficates of stock, and of transfers thereof, and upon a corporate seal ; do all other things 
which by law or the statutes of this Commonwealth the Directors of moneyed 
corporations are or may be authorized to do ; and, generally, to do any and every thing, 
not repugnant to the charter, which they may deem fit and proper to use and carry 
into effect the powers of the company. 

There shall be a meeting of the Directors, for the transaction of business, once in 
every month, and as much oftener as it may be found necessary ; a quorum of said 
Board shall consist of not less than seven members. 

CAPITAL STOCK. 

Any member of this corporation who shall be desirous of selling any of his shares, 
the executor or administrator of any member deceased, and the grantee or assignee 
of any shares sold on execution, shall cause such, their shares respectively, to be 
appraised by the Directors, which it shall be their duty to do on request, and shall 
thereupon offer the same to them for the use of the corporation, at such appraised 
value ; and if said Directors shall choose to take such shares for the use of the corpo- 
ration, such member, executor, administrator or assignee shall, upon the payment or 
tender to him of such appraised value thereof, and the dividends due thereon, transfer 
and assign such share or shares to said corporation: provided, however, the said 
Directors shall not be obliged to take such shares at the appraised value aforesaid 
unless they shall think it for the interests of the company ; and if they shall not, 
within ten days after such shares are offered to them in writing, take the same, and 
pay such member, executor, administrator or assignee therefor the price at which the 
same shall have been appraised, such member, executor, administrator, or assignee 
shall be at liberty to sell and dispose of the same shares to any person whatever. 

It shall be the duty of such executor, administrator, grantee or assignee to offer 
said shares for appraisal and to be taken by the corporation, if it shall so elect, when- 
ever requested by the Actuary or Secretary, and no dividends or interest shall be paid 
or allowed after a failure to comply with such request : provided, that such request 
shall not be made until after the payment of one dividend and the expiration of six 
months from the death of the owner, or sale as aforesaid ; but the offer may be made 
at any earlier period if the party shall prefer. 

The Directors shall have the power, and it shall be their duty, to sell and dispose 
of the shares which may be transferred as aforesaid to the corporation, whenever, in 
their judgment, it can be done with safety and advantage to the corporation ; and in 
all sales made by the Directors, under any of the aforesaid provisions, it shall be their 
duty to sell the shares to such persons as shall appear to them, from their situation 
and character, most likely to promote confidence in the stability of the institution ; 
no greater number than one hundred shares being assigned to any one person ; nor, 
in the case of a person already a member, a greater number than will be sufficient to 
increase his previous number to one hundred shares. 



384 PRACTICAL BANKI^a. 



CHAPTER XXVI. 

THE SUFFOLK BANK SYSTEM. 

I have, in previous chapters, made occasional allusion to this old- 
time foreign money redemption system, — a system which to-day has, to 
a very great extent, its counterpart in the National Bank Redemption 
Bureau at Washington. The Suffolk system was of a very simple 
character. I was for many years a part of it, as it were, for I was an 
officer in the Suffolk at the time when its redemption business was at 
the flood, and I am therefore able to speak understandingly of the 
matter. Its system was this : It undertook to redeem in specie or its 
equivalent, whatever bills of the banks of New England were presented 
at its counters. To be able to make these par redemptions it required 
of every bank in New England deposits of two types. First, the bill- 
issuing banks were required to keep with the Suffolk, current balances 
sufficient to face the incoming redemptions. Second, these banks were 
also obliged to keep with the Suffolk, a permanent deposit of about 
three thousand dollars cash, upon which the Suffolk paid no interest, 
and which deposit was in the nature of a compensation for doing this 
redemption business. There were three or four hundred of these New 
England banks which, when the Suffolk system was at its highest tide, 
were keeping with the Suffolk Bank these permanent deposits and 
thus giving it more than a million dollars steady deposits upon which 
it could bank, discount, etc. Then, on the current accounts with these 
depositing banks, the daily balances often footed up another million or 
so upon which, also, no interest was paid. 

An additional source of revenue was found in its system of deferring 
credits. It had a practice of crediting all remittances received from its 
corresponding banks a day later than their receipt. Out of its connec- 
tion with the country banks — a reciprocal account connection — there 
grew a very heavy collection business, upon which it also made large 
profits. These are the main credit points of the Suffolk system — the 
sunny side of the business. 

Here are what may be termed the debit views of the Suffolk 
methods and machinery. The labor and costs of working up the 
Suffolk system to a paying business — to a successful standpoint, were 
enormous. There were banks which long refused to redeem their 
notes at par at the Suffolk, and these resisting banks had to be forced 
into line by the tedious and expensive process of sending home their 
circulating notes for redemption in coin over their own counters, 



THE SUFFOLK BANK SYSTEM. 88& 

which coin, when collected by the agents of the Suffolk Bank, had to 
be carried home to that bank by slow and costly lines of carriage, by 
stage-coach or private conveyance. There were pugnacious banks 
which resisted to the very last extremity what they termed the 
over-bearing tyranny of the Suffolk, throwing in its path every 
obstacle ingenuity could suggest. 

Just about fifty years ago, the late William Lawrence, of honored 
memory, in company with a gentleman now living, and enjoying in 
his old age the love and respect of all who know him, started in their 
own private carriage on a redemption visit to State banks located at 
Salem, Newburyport and Portsmouth, which had refused to come 
gracefully into the traces of the Suffolk system. These gentlemen 
were the early Directors in the Suffolk, and they carried in their coach, 
bags of country bank bills, upon which they demanded and received 
the standard coin of the day, which they in person brought back and 
delivered to the Cashier of the Suffolk. On their journey they 
traveled to the West as far as Groton, and there enjoyed the old- 
fashioned hospitality of the Lawrence mansion in that town. Thirty- 
years later the Suffolk was redeeming a million of country bills a day, 
and the bulk of a good day's work was many bushels of small State 
bank notes. Around a Cashier's desk a crowd of coming and going 
expressmen were to be seen, loaded with huge packages of the nicely 
sealed country bank notes. 

When I first entered the Suffolk the large attics of its building were 
overflowing with boxes of all sizes and shapes, which had been used in 
the transportation of silver, large and small, that had been wilfully^ 
forced upon the Suffolk Messengers in redemption of notes by them 
presented. Many of these boxes rattled with counterfeit remnants of 
invoices of this silver — base coin which had been passed upon the 
Messengers. And when the Suffolk system was solidly established, its 
conduct required an immense force of clerks, a costly plant, and was 
of a character involving such responsibilities that again and again the 
Suffolk broached the subject of throwing up the whole thing — but this 
was mainly in those days of discouragement when then' profits were 
being undermined, and their care and work immensely increased by 
mysterious defalcations in the foreign money department. The country- 
money defalcations at the Suffolk were of a type of character well 
depicted by the following story of trouble and loss there : 

It was when there were nearly a hundred clerks in the foreign 
money department of the Suffolk, and the redemptions were averaging 
about a million dollars a day. These redeemed bills, which were 
largely made up of notes of small denominations, had to pass through 
the mill three times. First they were counted in, next they were 
assorted by their banks, lastly they were counted into packages and 
finally strapped and labelled. There were many days when the work 
would extend far into the night, and few days when the hours of the 



386 PRACTICAL BANKING. 

-department were less than from eight to eight. There came a time 
during this extreme pressure of business when the cash of this redemp- 
tion department began to report itself short every night — short in large 
amounts running from hundreds to thousands. Recounts, in the weary 
work of searching for the deficiencies, became a thing of almost daily 
occurrence and would extend very late into the night. There was no 
possibility of closely locating the variations, for the hands of the one 
hundred clerks were all in one basket. Attempts were made to weed 
-the department of clerks whose habits and appearance raised suspicions 
of their faithfulness. The most rigid inspection of the out-of-bank 
ways of life of the officers was instituted, and when this close espionage 
developed any facts which seemed to tell against a man, he was quietly 
asked to resign his position. But the outcome continued as before — 
night after night the short cash would face the worried managers. 
Somehow or other the department pulled through these days of trouble 
;and, in time, began to run along more smoothly. When the events of 
these days of worry had become simply an unpleasant memory there 
came an explanation of the mystery connected with them. A man who 
had worked as counter during the period in question, and. who had 
never been even suspected of irregularities, sent word to the Directors 
>of the bank from his sick bed, where he lay near his end, that he had 
been the guilty officer — the money-counter who had abstracted the 
missing funds. He asked forgiveness. There was nothing to do but 
to grant it, and let him die peacefully. 

Counterfeit bank bills gave the Suffolk a deal of trouble, and no 
year of its redemption business failed of reporting large losses from 
the receipts of fraudulent paper of this type. The banks of New 
England, under the old State system of banking, were in the habit of 
issuing circulating notes of fine execution — made of good paper, well 
.engraved, and always bearing two written signatures ; yet somehow or 
oother, the counterfeiters of the period succeeded wonderfully well in 
imitating these bills. Here is one of these old-time counterfeits, 
which was so well executed as to long escape detection. I can easily 
recall the countenance of the genuine notes of this Marine Bank, New 
Bedford — Joseph Gunnell's bank — and can testify as to the skillful 
way in which this fraudulent note was gotten up. I introduce the bill 
here for two purposes — one, for the object of showing the counterfeit 
dangers the Suffolk had to encounter ; the other, for the purpose of 
recalling its methods of dealing with discovered counterfeits. At first 
the Suffolk was in the habit of marking upon the back of bad bank 
bills presented, that is, the counterfeit and altered notes, a date and 
an initial showing the time when they were condemned by the Suffolk, 
and what clerk discovered their fraudulent character. Thus marked, 
the bills would be returned to the depositors from whom they came. 
But it would often come to pass that these rejected notes would again 
get into circulation. And if they came back a second time to the 



THE SUFFOLK BANK SYSTEM. 



387 



Suffolk, the marks upon their backs would at once betray to the 
initiated the name of the party who had passed them off knowing that 
they were not genuine. 

When these ' ' careless " persons were confronted with the facts of 
their discreditable course, they would redeem the notes but would 
generally declare that they must have slipped out of their hands 
accidentally. To avoid disagreeable complications of this character 
recourse was had to legislation and a law was enacted obliging the 
Suffolk Bank to brand in an uneradicable manner every fraudulent 
bank bill it got hold of. Under this law the Suffolk set up a system of 
burning into every condemned note with an iron brand and black, 
thick ink, the words "counterfeit" or " altered " as the cases might 
demand, with the added initials W. G. , for William Grubb, the venera- 
ble head of the Suffolk department of redemption. Bills thus treated 
could travel no more. Depositors were often vexed to find such 
disfigured bank notes returned to them, but they had to accept the 
situation. Here is the bill to which I have alluded — a curious relic, 
nearly thirty years old. 




/ Under the Suffolk Bank's redemption system corresponding banks 
whose bills they were redeeming and whose accounts they were keep- 
ing, were allowed to overdraw on payment of the then standard rate 
of 6 per cent. , if their credit and standing were good. But in times 
of great stringency these overdrafts would become so large in the 
aggregate as to be an immense strain upon the resources of the Suffolk. 
At such periods of closeness resort would be had to the most pressing 
appeals to delinquent banks to pay up. And when these dunning 
letters ceased to be effective, when it seemed as if a bank was getting 
hopelessly behind in meeting its redemptions, the Suffolk would stop 
returning its bills redeemed and, finally, if the case grew desperate, 
stop redeeming them altogether. In the latter case, the first move 
was to send a notice to the Boston papers of this ominous character : 
' 'The bills of the Sandown Bank, Sandown, K H., are no longer 
redeemed at the Suffolk Bank. " A circular to the same effect was then 
sent to all the 'Suffolk's corresponding banks, and it must be under- 



388 PRACTICAL BANKING. 

stood that, after such a notice, the Sandown Bank would find it pretty- 
hard work to keep out its circulation or get out any more, for nobody 
who did not personally know the bank would touch its bills, except at 
a discount, until the Suffolk had reinstated it I well remember 
periods of financial depression and panic when notices of this sort 
would crop out at the rate of two or three a day. 

The dimensions of the country bank overdrafts at the Suffolk were 
sometimes very startling. The Merchants' Bank, Providence, which 
was a little " Suffolk Bank " for Rhode Island, at one time ran its red 
ink figures — its overdrafts — up to a million. But in this case of the 
Merchants' as in other of the Suffolk's cases of advancing money to the 
country banks, it generally had in hand a security of a high class value 
in the shape of the collections belonging to the overdrawers, upon 
which it claimed to have a good lien. The Suffolk was always very 
patient with overdrawing banks, and never failed, in times of monetary 
pressure, to extend all the help to its hard-pressed corresponding 
country banks which its resources would allow, as long as its confi- 
dence in the integrity and general soundness of these debtor banks 
was unimpaired. But it was, of course, its fate to be sometimes 
deceived in its estimate of banks which were seeking accommodation, 
and, as a consequence, to suffer therefrom. Occasional out-and-out and 
most disastrous failures of New England banks whose bills were being 
currently redeemed by the Suffolk and whose accounts current were 
kept with that institution, brought heavy losses upon the Suffolk Bank^y 

The story of a single experience of the Suffolk Bank with a rotten 
New England bank' will illustrate this phase of its trials I am describing. 

The Bank was located above the White Mountains of New 

Hampshire. It had long kept a very slow account with the Suffolk — 
had for years just managed to keep its bills good at this redemption 
agency in State street. There came a period when its circulating notes 
seemed to be pouring in upon the Suffolk more rapidly than usual, 

while at the same time the remittances from this Bank became 

more and more scant and infrequent. But what was missing in cash 
seemed to be made up in most flattering promises — promises so 
plausible and earnest that the Suffolk Bank kept on redeeming its 
notes till it was debtor to the Suffolk to the amount of about $15,000, 
a sum for which the Suffolk had nothing to show but the redeemed 

bank notes. It was at the time when the connection with this 

Bank beyond the mountains had taken on this serious aspect that I 
was sent by the Suffolk to see what I could do with the delinquent — 
sent with the $15,000 redeemed bills packed in a valise, to hunt up 
the debtor bank and collect the money upon the bills, or obtain some 
security for the overdraft. A long and tedious journey in mid-summer, 
by rail and stage, carried me to the town where the embarrassed bank 
was located. Before I reached the place, I gathered from incidental 
talk with fellow-travelers, who knew nothing of my character or 



THE SUFFOLK BANK SYSTEM. 389 

errand, that the bank I was seeking had for a long time been a 
scandal in all the country around about it — had not been deemed 
worthy of the slightest confidence for years. The only place, they said, 
where its credit had been good for anything was at the counters of the 
Suffolk, Boston, to which they always sent all its bills for redemption 
whenever they got hold of them. On reaching the sought-f or bank, I 
found it in the hands of the State Bank Commissioner, who had 
finally scented out its condition and taken possession of it just before 
my arrival. The Cashier, a man of little business capacity and of 
very intemperate habits, who had had entire charge of the bank, 
had absconded. Its room was shut. There was little in it of any 
value but an old safe. All its available assets, if it ever had 
any, had disappeared. In its pigeon holes were no more valuable 
papers than past due, worthless notes, and accounts and letters 
from the Suffolk Bank. The man who sent his hat around among 
an impecunious crowd for a contribution which he did not get, 
said he was glad to even get his hat back. I was glad to be able to 
get back after a time to the Suffolk, from my collecting tour, with the 

bank bills with which I had started. In the end the Bank, of 

which I am writing, paid a trifling dividend. 

The Suffolk Bank system of New England, a system which had 
become a perfect success, and which had made it£ name known in 
financial circles of all lands, was born amid stirring financial contests, 
and had to struggle hard at the outset for an existence. It died very 
quietly. The bank which gave a name to the system reaped a good 
reward for its labors. It paid heavy and regular dividends for a long 
period, and became so strong and so solid an institution, that ' ' as 
good as the Suffolk Bank " became a proverb. Its bills enjoyed a wide 
circulation, for they were looked upon as types of reliability. 

The wayfarer, in Hawthorne's story, in taking a bill that was 
tendered to him, said he knew it was as good as the gold because it 
-was a bill of the Suffolk Bank. The Suffolk paid, when it merged itself 
into a National bank, a final dividend of $138 a share. The par of its 
shares was $100, The monopoly which it had so long held — the 
monopoly of the management of the foreign money system — was, long 
before the establishment of the National system, upset by the onslaught 
of J. G. Carney, the founder of the National Bank of Redemption. 
Mr. Carney was a most indomitable man— a man seemingly made to 
fight successfully what he termed the tyranny of the Suffolk. After a 
long and a severe financial contest, the Bank of Mutual Redemption 
came out of the struggle with a large share of the Suffolk's business in 
its hands. 

Thenceforward there were, up to the day of the setting up 
of National banking, two " Suffolk Banks'' in Boston — two redemp- 
tion banks, each holding nearly equal shares of the country bank 
business. And to-day the National Bank of Redemption, a solid and 



390 PRACTICAL BANKING. 

well managed institution, counts as its best hold that country bank 
business which has clung to it from the days when it fought the 
Suffolk Bank. 

In the later days of the Suffolk system the circulation of New 
England bank bills became very large in New York city. The 
Metropolitan Bank of New York city, started under the management 
of New England men — John Earl and William and Henry L. Jacques 
— was the agent of the Suffolk Bank in that city. Its daily remittances 
to the Suffolk of New England bills redeemed were very heavy. In 
those days the Metropolitan was one of the most active and one of 
the best managed banks in New York city. Its ruin — its downfall 
under Seney — seemed to old bankers who had known it from the start, 
a very lamentable and most disgraceful thing. 

In looking back over the history of the rise, progress, and final 
decline of the Suffolk system, one cannot help recurring to the fact 
that it had in its management, first and last, some of the ablest and 
most faithful bankers New England has ever known. 

The Suffolk always had an able corps of workers in its rank and 
file, and there graduated from this corps many of Boston's present 
leading bank officers. 

At the time of the establishment of the National Central Redemption 
Bureau at Washington the advice and assistance of officers who had 
helped to conduct the business of the Suffolk was sought and made 
very helpful. And the business done to-day in that Bureau is only a 
Suffolk Bank business of larger growth. 

Henry B. Stone, at the head of the Suffolk in its early days, was a 
banker of remarkable skill and power. 

And for at least 40 years two bank Directors whose names have 
ever been thoroughly identified with the Suffolk Bank's country money 
business, served consecutively on its chief committee — the committee 
on the foreign money department. These were Jeffrey Richardson and 
John A. Lowell. 

Jeffrey Richardson — a gentleman held in most kindly remembrance 
by all who were ever brought in contact with him — was a fine banker of 
the old school. He was a Director of the Suffolk for nearly 55 years 
and for more than 40 years was a member of the foreign money com- 
mittee of the bank — altogether the most important committee in the 
Board of Directors. 

While serving on that committee, and also in the more conspicuous 
position of President of the bank, which he held for 5 years, he showed 
a skill, a patience and a kindness of heart that won the respect and 
esteem of the clerks under, and the men of business who were associ- 
ated with him. Early in life he had been an active merchant — a large 
importer and dealer in iron — but from the date of his entry into the 
Board of the Suffolk Bank up to the day of his death, his time and 
attention were more given to the banking business than to trade in the 



THE SUFFOLK BANK SYSTEM. 391 

old store on Central Wharf, which he nominally occupied for half a, 
century or so. 

When it became evident to most Massachusetts bankers that the 
days of banking under State charters were numbered and that there 
was no alternative for the old State banks but to submit to Secretary 
Chase and be nationalized, Director Richardson, who had all his life 
been identified with State banking, either in the capacity of President, 
or Director, could not be convinced of the wisdom of reorganizing the 
Suffolk Bank under the National system. He talked against it, he; 
wrote against it, and, alone in all the Board, he to the last voted 
solidly against it, because, as he said, he never approved the wisdom 
of the change. Following is an accurate likeness of this worthy banker 
that will vividly recall to many a reader his kindly face and cheery- 
presence : 




Another well-known officer was Mr. William Grubb, and any detailed 
account of the Suffolk Bank foreign money system would be very 
imperfect if it did not make particular mention of his remarkably long 
and faithful services as chief clerk or Manager of the Suffolk's foreign 
money department. I knew this gentleman well, having been for 1& 
years brought in close connection with him while serving as an officer 
in various departments of the Suffolk, and I can testify that he was? 
one of the most faithful, patient and industrious bank officers I have^ 
ever known. 

On May 24, 1824, he entered the Suffolk and took charge of it&- 
country money business — which it had just assumed as agent of the 
associated banks of Boston. Mr. Grubb received a salary of $60 a 
month, with one assistant, a Mr. White, who was paid $50 a month. 

Mr. Grubb died in May, 1862, after serving as principal officer of 
the foreign money department for nearly 40 years. 

Early in his career, as head of this department, a contract was made 
with him that he should assume all the risks of the business as far as 



392 



PRACTICAL BANKING. 



losses from counterfeits and short cash were concerned, and hire all 
liis own clerks. Under this plan his business responsibilities and corps 
of clerks increased until he had , nearly eighty men under him, was 
•counting $1, 000, 000 a day, and receiving a pay of $40,000 a year. 

At one period the losses of the Suffolk foreign money department 
amounted to over $10,000 in a single year. This was just before the 
bank divided up the department into several separate divisons, each 
one of which was under a head clerk. 

Here is an accurate picture of this old-time bank-officer : 




When the Suffolk Bank began redeeming and sending home bills 
of the banks of New England there were no express organizations, and 
the money packages which had to pass to and fro between the bank 
and its corresponding country banks went by the hands of private 
messengers, stage-drivers, etc. 

The stage-drivers who were connected with this bank business have 
nearly all expired. Once in a while, some old whip turns up to relate 
his perilous adventures by road and inns with those old-time bundles 
of money and bags of coin which came from or traveled towards the 
Suffolk Bank of Boston. Niles, of the New Hampshire stage lines, 
may be named as a living typical representative of these coach drivers. 

And those special messengers which the Suffolk employed in the 
beginning of its work have all passed away with the single exception 
of the venerable Morse, of Sherburne. Morse was succeeded early by 
a man known among the country banks as "Old Wyman of the 
Suffolk." His messages to the country banks were often of an 
ungracious character, and they seldom welcomed his advent among 
them with his stacks of their bills and his demands for specie. 

When, in his advanced life, Mr. William Wyman gave up traveling 



THE SUFFOLK BANK SYSTEM. 393 

for the Suffolk, he retired to a coal business at East Cambridge to which 
he had been helped by Suffolk friends, and in which he remained 
until his death. 

At the counters of this bank in the days of its redemption activity 
might every morning be seen, signing receipts for stacks of packages of 
country bank bills, those well-known pioneers of the New England 
express business, Alvan Adams, Col. A. D. Hatch, B. P. Cheney, Fiske 
of the Vermont lines and a host of others of the same profession, most 
of whom have passed away. 

Col. Hatch, still full of activity, can justly claim to rank as the 
oldest living express messenger in New England, and one who has taken 
from and delivered to the Suffolk Bank about as many packages of 
money as any express agent. 

Without doubt the development and rapid early growth of the 
express business of New England was largely due to the carrying 
demaDds created by the Suffolk system, and to-day the express system 
and railroads have entirely taken the place of specie messengers and 
private conveyances ; no vestige of the old State system of banking 
remains, as far as circulation is concerned ; but the express companies 
are bringing in every morning to the National banks throughout the 
country their issues of National circulation, redeemed at the National 
"Suffolk Bank" at Washington and to be accounted for to that 
institution without delay. 

From the experiences of the Suffolk Bank I have gathered many 
anecdotes which I have given in the preceding pages. I venture to 
close this chapter with still another which I think I have not yet used. 

In the days when the redemption business was at its height, the 
Cashier of the Suffolk once delivered into the hands of the agent of 

the express company a package pf redeemed bills of the Bank, 

which were to be delivered at once to that bank, and which were, on 
delivery to the said express agent, charged to the bank's account. 
The package, which was duly receipted for by the express agent, was 
a bulky one, for it contained some thousands of dollars of small bills. 
This ends the first chapter of this story. At the close of the month 

the Suffolk Bank rendered its account to the bank, upon which 

stood boldly the charge against the bank of this aforenamed delivered 

package. The bank, on examining the account, reported as a 

discrepancy this charge for bills redeemed and sent home, representing 
the delivery we have described, for they said they had never received 
such a parcel. The express agent was overhauled. He looked at his 
records and his receipt for the bills on the books of the Suffolk Bank. 
He said it did seem as if he took that missing package but he could 
not imagine what had become of it. Here the mystery began. The 
matter dragged along under this cloud for weeks. Much correspon- 
dence was indulged in and a law-suit was imminent. At the end the 
whole contention was cleared away and the mystery solved by the 



394 PRACTICAL BANKING. 

discovery, by the express agent, of the lost bills in a sly corner of the 
box under the seat of his express wagon where the package had been 
knocking around in the wagon for all those weeks. 

Of course matters were straightened out at once, but had the express 
agent been particular about squaring his delivery book, or the Suffolk 
Bank more particular about checking off its acknowledgments for 
remittances made to the country banks, the money would probably 
have spent that time in a safer place and our story would have been 
much shorter. 



EVERYDAY QUESTIONS AND OTHER MATTERS. 395 



CHAPTER XXVII. 

EVERYDAY QUESTIONS AND OTHER MATTERS. 

Banks are often applied to for charity bestowments — voluntary- 
contributions to this, that, and the other benevolent objects. Such 
appeals can of course, only reach the bank through its Directors. The 
Directors are merely the representatives of the shareholders, who are 
really the bank. Broadly stated, the Directors of a bank have no 
right to give away the shareholders' money. They were not delegated 
such a power when they were chosen to their position. They were 
put in their places to act as managers of the stockholders' capital, and 
such other capital as might cling to the bank in the way of deposits, 
circulation, etc., and to manage it with the view of making as 
much profit on it as is honestly possible. For these reasons bank 
Directors should be very wary about voting away funds of the institu- 
tion in their charge in response either to the calls of charity, philan- 
thropy, or patriotism. Banking capital is placed in the ruts of 
bminess to earn money in doing business. Its Managers are given no 
discretionary powers which can be construed into powers to make 
donations other than those which may be deemed to be in spirit 
legitimate, judicious, business investments — charity prompted by 
policy and prudence, and practiced simply because the best judgment 
of the Board of Directors gravitates to the conclusion that the bank 
will, all things considered, be in the end a gainer pecuniarily by the 
charity investment. 

Of such a character are votes of money by a bank to Help along 
rebuilding operations in a fire-stricken locality, which is covered to a 
large extent by its loans. In this case it gives away shareholders' 
money in order to save more money for them by helping along the 
staggering debtors of the bank. It is easy to imagine many instances 
of giving similar io character to this one. 

In time of war, banks may legitimately vote to donate money to 
help in the work of the self-preservation of their Nation, whose rum 
would be the ruin of its banks. 

Grants of money to disabled employees who have served it long 
and faithfully, and who are found to be in need when no longer able 
to do duty, come within the category of gifts properly and legitimately 
bestowed by a bank. For action of this character is good banking — a 
part of its legitimate system. 

Charity investments of this description on behalf of the shareholders; 



396 PRACTICAL BANKING. 

are justified on the true ground that the proper recognition and 
encouragement of the men who are in responsible positions in banks is 
merely a measure of self-protection and strict justice. 

But, reverting to the general principles which rule in the premises 
before us, we have only to say, finally, that bank Directors have no 
bank money to simply give away. The bank money is the property of 
the shareholders. If the shareholders wish to give they can take 
money out of their individual pockets. 

SMALL ACCOUNTS. 

Every bank has upon its books accounts from which it receives no 
direct profit. Many of these are so small that they hardly pay for the 
paper upon which they are kept. They have been taken on for various 
reasons ; the most common reason being that the account has come in 
such a shape that it has been more difficult to refuse than to accept 
it; and, in many instances, the expectation of some indirect advantage 
from keeping them has had something to do with their acceptance. 
These little accounts are generally personal, and it will be noticed that 
the oldest and best of our banks generally have the most of them, for 
such banks have the widest circle of personal acquaintances. 

Recognizing the fact that there must always be large numbers of 
these little bank accounts, which have got to be kept by somebody, 
the question of what shall be done with them is the one that must be 
disposed of. 

I would recommend to all banks to take all of the respectable 
accounts of the class in question that are offered, no matter how small 
they are likely to be, and charge a commission for keeping them. A 
great many of these small depositors would prefer this way of doing, 
for it would place them upon an independent footing. 

And many who would like to open bank accounts, but who are 
deterred from so doing because they don't like to place themselves 
under obligations to a bank for doing business for them which does 
not pay, would open accounts if there were some arrangements for their 
paying a percentage upon them, to cover their cost and as a fee for 
banking privileges. 

SPECIAL DEPOSITS OF VALUABLES. 

The Banking Department at Washington long ago took the ground 
that the National banks had no legitimate right to encumber them- 
selves with the labor and responsibilily of storing and caring for 
special deposits of money, bonds, and other valuables, belonging to 
their customers ; and, as a consequence, and greatly to their relief, 
most of the National banks have abandoned this sort of business, and 
thereby given to the safe deposit companies a clear field for their work. 

Some banks have set up special safes or vaults, in which their 
Directors and a few heavy customers are allowed lock boxes for the 
storage of valuables ; but this is a custom which is not very satisfactory 



EVERYDAY QUESTIONS AND OTHER MATTERS. 39? 

either to the bank or customers. These Directors' vaults afford, it is. 
true, free safe deposit room, but it is not deposit room which has such 
well-nigh perfect and systematic safeguards as our first-class safe 
deposit companies ; neither does the bank which furnishes this room 
assume any direct responsibility. 

The custom of the banks, which once so generally prevailed here, 
of keeping store rooms for their dealers is of London origin. London 
banks have done this sort of business for one or two hundred years. 
It is only recently that the public safe deposit idea has obtained there 
at all. And the only safe deposit company which has been set up in 
that city has never paid a dividend, and has received light patronage. 

The London banks have, so far, never made any charge for the use 
of their strong rooms. But heavy losses from them, which policy has. 
induced them to make good, have disgusted them with the business, 
and they are now proposing to give up the business or make a charge. 

French banks never take charge of valuables on account of clients 
without making a specific charge and undertaking complete responsi- 
bility for any ordinary loss which may happen. The rate charged is 
about 4d. per £100 per annum, or about one in six thousand, and is 
moderate enough. Now and again the banks have the opportunity of 
giving notice to their customers that the latter must take the risks of 
war — this being something like the clause in marine policies which 
exonerates the underwriters from piracy, war, etc., — but the customers,, 
on the whole, obtain real security. 

NOT RIGHT. 

There is a bad usage in banking which is seldom discussed — seldom 
condemned, as it should be — to which direct reference should be made 
in any treatise on practical banking. The practice we here have in view 
is that of paying private commissions to Cashiers and other leading 
ofiicers of banks for securing their services in the way of influencing 
purchases and investments made on behalf of their banks, depositors, 
correspondents, and trusting friends and acquaintances who come to 
these ofiicers for advice in regard to investments. 

It is an e very-day occurrence for a bank Cashier — especially if he 
is connected with a large bank in some great financial centre — to 
receive from promoters of new companies, who are endeavoring to 
float the stock or bonds of their concerns, or from brokers and dealers 
in shares and bonds and money investments of many sorts, circulars 
setting forth in attractive style the sure and profitable character of the 
proposed investments. The circulars are often accompanied by a 
private slip, not intended for eyes other than those of the Cashier, and 
least of all those of his customers, stating — and here we copy from an 
actual, working circular of the class in question, the last one, in fact, 
that I received: 

In case you should have any friends who would like to invest some money in these 
mortgages we will pay you a commission of 2 per cent, on all money which you send 



398 PRACTICAL BANKING. 

us to lend for other parties. We guarantee satisfaction. We hope you will consider 
this proposition favorably, and give the matter a part of your time with the result of 
sending us some funds to lend. Should there be any points on which you desire 
further information we will answer your inquiries. Hoping to hear from you soon, 

We remain, . 

The investments offered by this circular were guaranteed by its 
signers to pay 8 per cent, net; and when money can be readily 
obtained for about half of this rate, on good security, the conclusion 
must be reached that its holdings forth must be at least a little 
delusive. 

This Cashier's commission business often assumes another phase. 
These officers are, in the regular course of their business, in the 
discharge of legitimate duties for which they have been retained by 
their banks, often called upon to buy and sell for their banks and its 
customers and occasional correspondents, securities of every name and 
nature. The bulk of business of this character has to be done by them 
through private bankers and brokers. In such buyings and sellings 
the Cashier is sometimes tendered by the parties with whom he deals 
— the brokers and bankers from whom he buys or to whom he sells — 
a commission which does not appear on the surface of the transaction. 
He finds no mention of it on any bills of sale or purchase, yet it is 
quietly offered to him as if it was a regular thing that he should accept 
it. If he does so he places himself in a false position — has given his 
countenance to an objectionable practice. The parties for whom the 
buying or selling is done know nothing of the charge ; for the bills of 
sale and purchase are made out at what may be termed the long prices 
and not the net ones. The bank whose officer he is often knows 
nothing of this business, for it appears upon no record. The commis- 
sions in question really come out of the "consumers" — the parties 
for whom the transactions are effected. 

Bankers and brokers, who are dealing with Cashiers whom they 
know they must divide commissions with, cannot in the long run make 
as favorable terms with them as with Cashiers who will not accept 
such " influence " money. 

Many a bank Cashier who has ' ' gone under " began to fall by first 
taking the steps we here condemn. 

THE RIGHT TO ISSUE TIME CERTIFICATES OF DEPOSIT. 
Such issues we do not consider in harmony with the principles of 
sound banking, and they are not distinctly provided for in the Bank 
Act of the United States. They have never been directly countenanced 
by the Banking Department, yet it must be stated that there are no 
distinctly prohibitive clauses in the Revised Statutes of the United 
States and no statutes or legal decisions under those statutes that have 
ruled them out. National banks have from time to time issued time 
certificates, and some are to-day doing so. The existence of vouchers 
of this class has been reported to the Department, and they have often 



EVERYDAY QUESTIONS AND OTHER MATTERS. 399 

figured in the regular returns to the Comptroller, yet the banks making 
such issues have not been proceeded against therefor and have not 
been suppressed for doing business of this character. 

Here is a very curious fact relative to this matter. The Comptrollers 
of the Currency in the past have pronounced against these time 
certificates. The present Comptroller sets his face against them when- 
ever questioned on the matter. Yet, singularly enough, he sends out 
to all the National banks of the United States, whenever a return of 
condition is called for, an official blank form for a statement in detail 
of condition, which contains an item and heading under which time 
certificates of deposit are to be reported where they exist as a part of 
the deposits of the bank. 

The inconsistency we are alluding to has long been a matter of 
common talk among bankers, and we are surprised that public atten- 
tion has not been more generally called to it. 

DISCLOSING THE CONDITION OF A DEPOSITOR'S ACCOUNT. 

A nice point is, to what extent it is justifiable and reasonable for the 
managers or officers of a bank to reveal to third parties the condition 
of the account of one of its dealers. There is no direct and positive 
rule that can be laid down in this regard. Law and common sense 
must be left to rule according to circumstances in this delicate matter. 
The semi-public character of banking institutions is a feature which 
has an important bearing upon the question raised. National banks 
are obliged to publish reports of their condition, to make regular 
statements of their resources and liabilities to the Comptroller of the 
Currency, and to give the public Examiners access to all their 
methods, machinery and records of all the transactions of every 
name and nature which they may have. It should be borne in mind 
that any shareholder in a bank, no matter how limited his holding, has 
a right, as one of the proprietors, to ' ' look into " his bank to any 
extent that is not an unreasonable interference with its regular routine 
of work and not an unjustifiable interruption of its administration. It 
is often argued that any person, who has found it difficult to get at the 
situation of the affairs of a bank by a direct approach, can accomplish 
his purpose by carefully studying its published reports or by buying 
the smallest amount of stock and then demanding a view of the inside 
on the ground of being a stockholder. 

Bank managers and officers should take extreme care not to 
disclose in an indiscreet manner any business affairs. 

SHALL WE PROTEST? 
It was a certificate of deposit, regularly issued by one of the strongest 
National banks. Its amount was $5,000. In time it came back for 
payment through the Clearing-House from another National bank, 
bearing numerous endorsements besides that of its first payee, because 
it had passed through many hands, and had been made payable from 



400 PRACTICAL BANKING. 

one to another. When the Paying-Teller of the issuing bank came to 

pass upon this certificate before he should finally pay and cancel it he 

found one clearly demanded endorsement missing. One payee had 

omitted to put his name to the voucher. The certificate was for this 

reason at once stopped and returned to the bank last holding it and 

from whom it had been received through the clearing settlement. This 

latter bank refused to guarantee the missing endorsement, and, after a 

second regular demand upon the bank issuing the certificate, protested 

it for non-payment and returned it with charges. This case is of an 

instructive character, since the question at issue under it is whether 

there is any need of or any advantage in protesting checks, certificates 

of deposit, etc., of whose face there is no shadow of doubt and which 

are sure to be good when presented, simply because of fully conceded 

irregularity of endorsements or an absence of needed endorsements. 

It seems clear enough that there is not the slightest need of protesting 

under such circumstances, and the protesting bank, in the case we 

have described, was clearly in error in making a protest. What 

possible need is there of protesting a certificate of deposit which is sure 

to be paid whenever presented properly endorsed simply because the 

bank which has issued it refuses to pay it because it comes in not 

properly endorsed ? Protests are made to hold endorsers ; but what 

object is there in securing endorsers if a bank is entirely satisfied with 

the promisors ? 

WHEN INTEREST ACCRUES. 

There is sometimes a little confusion in the minds of bankers and 
business men regarding the question of the interest dues in transactions 
where there are no specific statements of interest contracts. There 
are certain well-defined principles which govern such cases that should 
be understood. Money voluntarily left by any one in the hands of 
another will not, of course, draw any interest unless a specific mutual 
agreement to that effect is made. But when funds belonging to one 
person are wrongly detained by another, the owner can set up a legal 
claim for interest upon the sum which has been kept from him, and 
the rate of interest collectible under such circumstances will be deter- 
mined by the law of the place where it is detained. 

There is a point of no little importance to be noted here. It is often 
asked whether or not interest can be enforced where a party gives a 
note to another payable on demand without inserting in such a note 
the words "with interest," although the transaction was entered into 
with the understanding upon the part of both borrower and lender 
that interest should be paid upon the sum advanced. The claim for 
interest under such circumstances would be a very substantial one, 
for it would rest upon very solid grounds. In the first place it would 
always be probable that some proof of the existence of an agreement 
or understanding that interest should be paid upon the money advanced 
could be presented, but without such specific testimony the interest 



EVERYDAY QUESTIONS AND OTHER MATTERS. 401 

demanded would find a very solid support in law and equity in the fact; 
that the very nature of the money transaction in question carries with 
it the idea of compensation — of hire or interest. 

The money is the property of the lender, who has placed it in the 
hands of the borrower at the request of the borrower as an accom- 
modation. The voucher given is not a simple certificate of deposit but: 
is a promissory note carrying with it the distinct idea of accruing interest. 

FORGED ENDORSEMENTS. 

A bank is supposed to know the signatures of its depositors. It is 
one of its first and most important duties to have them on file and 
immediately accessible by the use of a well-kept signature book. 
Holders of checks, in very many cases, know nothing about these 
drawer-signatures. They have taken them, supposing, of course, that, 
they are genuine. When they have collected the checks at the banks 
upon which they are drawn they are to a very great extent relieved of 
all further responsibility as to the signatures of the signers, for the 
bank by paying them has guaranteed their genuineness. But the- 
bank which cashes for a good holder a much-endorsed check, the 
signature of which is all right, generally knows nothing about its 
many endorsements beyond the fact that they seem to be all right and. 
stand there in regular order, apparently correctly made. For the 
honesty and genuineness of these many or few preceding endorsements 
the last holder, for whom the check is cashed, whether he endorse 
the check or not, is fully and legally held, and no reasonable lapse of 
time before a discovery of the forgery is made will relieve him of this, 
liability. 

Bat when some drawer or endorser states to a bank that it has^ 
at some past date paid a check bearing a forged instead of a genuine 
signature of that person, and makes a demand for a repayment of the 
money, the bank which has the misfortune to stand in such a position 
must proceed carefully in this matter of acknowledging the fraud and 
repaying the amount* It has a right, and it is its duty, to demand 
from the party who declares that his name has been forged upon the 
back of the check a well-supported affidavit to that effect. The rela- 
tions and responsibilities of the paying bank to the drawee and to the 
other genuine endorsers of the check render this course absolutely 

necessary. 

INK RESPONSIBILITY. 

A courteous and intelligent man calls at my desk, and, sitting down 
by me ask3 and obtains my permission to show me in five minutes that 
all the inks I am using in my bank, and all which I have ever used and 
ever can use, except the one he proposes to show me, are just good for 
nothing. By "good for nothing" he means, that they can all be 
quickly removed from common paper, while by ink which is good for 
something, he means the ink that he is going to show me, which he 
says cannot be washed out. This ink-man carries with him a little. 



402 PRACTICAL BANKING. 

case, containing two small bottles holding preparations of acids, and 
accompanied by a camel's hair brush. ' ' Snook's ink eradicator " he 
terms this affair, and says that I or any one else can buy it for fifty 
scents from any stationer. He adds the remark that his friend Jones, 
Tthe great bank stationer, says he never sells this ink eradicator without 
"feeling that he does a careless, if not a wicked, thing. 

From the letter, check or draft which I have just been writing, the 
man with the new ink quickly washes, with his eradicator, with perfect 
ease, any or all of the words or figures which I have made upon them. 
He makes what we term a "good job " of the thing; for, after he has 
ended his bleaching process, there remains upon the paper no trace of 
the former writing and no sign of the workings of the acids. The ink- 
inan then kindly shows to me his own new and wonderful ink, the 
great fluid called the "cosmopolitan safety ink," which is to revolu- 
tionize the writing business, since it will make tracks upon paper which 
no man can remove with any chemical preparation that has been 
discovered or that ever can be discovered. In proof of all this the 
agent writes in my presence with his ink, and then vainly attempts to 
eradicate what he has written with the ink eradicator I have described 
.as being a part of his equipment. 

The agent of the cosmopolitan ink next produces an experimental 
sheet, whereon all the standard common writing fluids of the period 
have been submitted to acid tests by Messrs. Copperas & Co., the 
leading chemists and assayers of New York, with the result that every 
one of them may be said to have stepped down and out under the 
inquisition to which they have been subjected — not one of them offering 
any sort of resistance to the leading and well-known re-agents which 
come into the class of ink-eradicators. 

This significant exhibition is then supplemented by the display of 
another test sheet, on which the cosmopolitan ink has been subjected 
to precisely the same chemical trials as those which were imposed upon 
the ink-list just described, with the result that the new ink stood out 
dear and strong after all the attacks made upon it. 

In view of such interesting facts as these, what is the practical 
banker of to-day to do in these ink premises ? Shall he at once discard 
.all his old inks and adopt the new — or what shall he do about the 
matter ? 

At this precise stage in the history of ink inventions and ink-eradicat- 
ing discoveries, it is not easy to answer the questions I have raised 
in this connection. 

When it has been as firmly established that any new ink will stand, as 
it is now certain that the old will not stand, it will become the duty of 
all bankers to discard the old and adopt the new. It will become unsafe 
for them to do otherwise. By doing anything else the banker will take 
upon himself a dangerous responsibility — a responsibility similar in 
mature and philosophy to that which he assumes when he uses an unsafe 



EVERYDAY QUESTIONS AST) OTHER MATTERS. 403 

paper in drawing checks, or unsafe doors and locks when he puts away 
the cash and securities of his bank. 

The most interesting question to be raised by any alert banker when 
a new safety paper, a new combination lock, a safety ink or a check 
punch is presented to him is this : You say no attempt to circumvent 
either has so far been successful, but how long is it to be before cunning 
rascals will, by their successes, prove them worthless as safeguards ? 
How long will it be before the agents of something new in each of the 
lines named will come along, saying, ' ' These are all ' no good ; ' here is 
something you can really rely upon. " 

The responsibility assumed by banks and business men when they 
do not use the best of methods and machinery in the transaction of 
their check business is laid down clearly in the following legal decisions 
in "Daniel on Negotiable Instruments": 

" But when the drawer has drawn his check in such a careless and incomplete 
manner that a material alteration may be readily accomplished without leaving a 
perceptible mark or giving the instrument a suspicious appearance, he himself prepares 
the way for fraud, and, if it is committed, he, and not the bank, should suffer. This 
doctrine is clear, and sustained by authority." 

The Supreme Court, the United States Circuit Court and the Court 
of Common Pleas have rendered the following decision : 

"The maker of check is obliged to use all due diligence in protecting it ; the 
omission to use the most effectual protection against alteration is evidence of neglect, 
which renders him responsible for the fraudulent amount, the bank being responsible 
only i.or the genuineness of the signature and ordinary care in paying the check." 

The United States Circuit Court, October 15, 1874, gave the opinion : 

" If there was nothing unusual in the appearance of the raised check, nothing 
sufficient to put a careful person on his guard, the bank shall not be responsible for 
paying it." 

The Court of Common Pleas, "Herald," February 3, 1875: 

" Where one person, by his act or omission, induces another to part with his 
property beyond the power of reclamation, he is estopped from showing, as between 
such person and himself, that such action on his part was the result of ignorance or 
of fraud practiced upon him. Of the two innocent parties, he is the one that must 
bear the loss." 

POWERS OF ATTORNEY. 

The banker who is asked to accept for himself or to guarantee for 
some one else the correctness of an endorsement by attorney, expects 
that the paper of authorization under which the attorney acts will be 
left with his bank or placed on file at some other bank or an equally 
accessible and public place. Powers of this sort — in fact all kinds of 
what may be termed per procuration papers — are in many cases very 
judiciously made a matter of public record at the offices of Registers of 
Deeds. In such cases the fact of the record is carefully minuted on 
the original power by the officers at the office of the Register of Deeds, 
and the record at this office is of great reference value in case evidence 
of the correctness and existence of the powers in question are asked 
for. In drawing up papers of the class discussed ready aid may be 
found in the books of law forms which are sure to be in the library of 



404 PRACTICAL BANKING. 

every bank. Below will be found an original form of a power of 
attorney from a husband to his wife to draw checks, collect dividends, 
etc. which is a model of conciseness and directness. It will have a 
curious interest for the reader from the fact that it is the power of 
attorney of Daniel Webster to his wife — in Mr. Webster's own hand- 
writing — a power taken from the files of the bank where it was actually 
used by Mrs. Webster : 







4k i<"?*cy *fr /*~~.*~? M/*- 



LEGAL AND ILLEGAL HOLIDAYS. 

There are two classes of holidays for bankers and merchants who 
are willing to take them — those which are termed legal holidays and 
those which are not. In the case of the first named the banks find no 
difficult questions arising as to the way they shall be kept. 

Banks on such days are not open at all, do not receive their mails 
or transact business of any description, but as far as business is con- 



EVERYDAY QUESTIONS AND OTHER MATTERS. 405 

cerned, consider them just the same as a Sunday, and this arrangement 
is, of course, perfectly safe and consistent. 

Illegal holidays, on the contrary, are in many points a source of 
annoyance both to the banks and their customers. We have in this 
country none too many bank holidays, and in the matter of closing 
days it would be a far better arrangement than the one now existing 
if we had more lawful bank holidays and fewer days of closing which 
have not been legalized; for where a bank observes holidays which are 
not legal — shuts up its place of business when it has no legal authority 
to do so — it has to assume responsibilities which are sometimes trouble- 
some and even risky. 

The matter of maturing paper is one of the most important points 
I should mention in referring to this matter. 

Where notes maturing on the illegal holiday are in the hands of the 
closing bank for collection it cannot oblige the promisors to take them 
up the day preceding. Most makers of paper are, however, in the 
habit of cheerfully doing this. They shut up, themselves, on the holiday 
and are, of course, glad to attend to all business which matures thereon 
on the day in advance. But those exceptional customers who do not 
favor the closing, and do not close themselves or wish any one else to 
do so, know their rights and are often quite willing to maintain them. 
Their holiday-maturing paper, where the holiday is an illegal one, must 
be kept in hand by its holders until the close of business on the holiday 
in question, for it cannot be protested until then. If the paper is 
payable at a particular bank, that bank must in effect be open at its 
regular hours on the illegal holiday in order to attend to this paper, so 
that banks which shut under such liabihties for collection and present- 
ment usually leave some clerk at the bank to take charge of the unpaid 
maturities of that day — collect or protest them — or post a notice on the 
doors stating where their unpaid paper maturing on that day may be 
found and where presentments coming to them may be demanded. 

If the maturing paper has not been made payable at a bank or any 
other specially named point other than the signer's residence or place 
of business, the bother is increased, for if unpaid, it must be presented 
to and its payment demanded from the maker personally (if he can be 
found) at his place of business, or his residence if he cannot be found 
at his place of business. 

Makers of notes of this last-named type cannot be forced to hunt 
up their paper — to go to a bank, for instance, to pay; they can demand 
that the paper shall be brought to them before a legal demand can be 
made upon its endorsers. 

The bank, which shuts on an illegal holiday with paper of this class 
maturing that day, must be very careful to see that the paper in ques- 
tion is attended to in the manner we have stated. 

Sometimes awkward embarrassments arise in closing on illegal 
holidays in the matter of the deposits. A dealer has been known to 



406 PRACTICAL BANKING. 

make trouble for his bank because it shut up his balance — made it 
inaccessible — on an illegal holiday when he needed to check upon it 
to meet notes or pay bills. 

The treatment of the incoming mails on an illegal holiday is also a 
serious question and closing banks are sometimes at a loss what to do 
in this matter. 

Especially is this the case in cities and towns where there are many 
banks and a Clearing-House. As no settlements at clearing are made 
on such days, and as the banks have no means of making collections 
from each other, it evidently becomes a dangerous and embarrassing 
thing for any bank to take its letters from the postoflB.ce on such a day ; 
if it takes them from the mail it should open them, and if it opens them, 
the question arises how shall it proceed if the letters contain large 
checks and sight and demand drafts ? Regarding its treatment of the 
latter the difficulty is increased by the fact that the places of business 
of the drawees are likely to be shut. 

If it does not take its mail from the office at all it certainly may 
incur very unpleasant responsibilities, yet the chance of trouble seems 
less from this course ; and I have no doubt that it is the better plan not 
to take the mail from the custody of the postoffice. My readers will 
not doubt that I have very decided views against going for the mails 
on Sundays and other legal closing days. 

SHALL NATIONAL BANKS BBCOME DEALERS IN MONEY? 

Shall National banks become dealers in money, or shall they simply 
bank upon the capital furnished them by their shareholders, unhired 
depositors, and bill holders ? There is no banking question of the 
period of more vital interest than this, and none which is being more 
actively discussed. 

There is no doubt but that some of the most successful banks in the 
United States — banks which have paid the largest kind of dividends, 
and which to-day show a heavy surplus and a current business of the 
most profitable character — are those which have been run upon a 
moderate share capital and large interest-paid deposits. These banks 
have bought money in all directions, paying comparatively heavy 
prices for it, and have sold the same at a very slight advance. Yet the 
magnitude of their transactions has so swollen their profits that their 
small capitals have reaped the largest remuneration. This is doing 
business on the London joint-stock bank principle — a principle which 
has in London been worked with marvellous success. The leading 
London banks in question carry deposits, upon which heavy interest is 
paid, to the amount of from ten to twenty times their capital. Their 
dividends have for many years been enormous, and their shares to-day 
sell, in some instances, at two or three times their par value. 

Banks which deal in money to the extent which I have described, 
and which carry the limited share capital, have need only of making a 
very small percentage on the money they handle in order to earn a 



EVERYDAY QUESTIONS AKD OTHER MATTERS. 407 

large dividend for their share capital. The motto of such institutions 
is large sales and small profits, yet the net results are most satisfactory. 

The risks of banking of this class are large. The management of 
the enormous loans, which is the critical feature of the business,, 
demands extraordinary vigilance and caution, for a slight sweep in the 
wrong direction, where such heavy current investments are being 
made in notes, acceptances and collateral loans, must at once wreck 
all prospects of dividends for stockholders. 

It must have been noticed by observing bankers that the drift of 
banking in the United States has of late been in the direction of an 
imitation of this English style of doing business. The great success 
which has marked the management of some of our largest trust com- 
panies — which have copied directly the London banking methods — 
has had much to do with leading the National banks into the habit of 
paying higher rates of interest upon deposits. 

WHAT CONSTITUTES A LEGAL SIGNATUEE. 

I held in my hand, on one occasion, a draft drawn upon the United. 
States for $25. It was a draft for a poor soldier's quarterly pension. 
Being written payable to his order it needed his endorsement. The 
soldier had endorsed it with a lead pencil. The United States refused 
to pay, saying it must be endorsed in ink. I had to send the uncollected 
draft traveling back five hundred miles in search of the soldier and an 
ink endorsement. The demand of the Treasury was in accordance 
with its regulations, but not in accordance with English and American. 
law, and may be termed a red-tape rule. A signature written in pencil 
is just as binding as one written in ink. In fact, it makes little 
difference with what materials a person records his or her name ; and,, 
even more, an individual can be said to be the endorser of a paper if he 
does not put a mark upon it at all, but merely makes a declaration to 
that effect. For illustration of this point let me lead my reader to the 
busy desk of a Paying-Teller of a bank, where I have witnessed such 
a transaction as this : 

Resolute customer presents a check on the bank payable to his own- 
order. Teller says, ' ' You must endorse it. " Customer refuses, saying, 
"You have the check in your hand, and I have ordered you to pay it;, 
what more do you wish ?" If the check was cashed under such cir- 
cumstances, the law would hold that the payee had really "endorsed" 
it, although he had left on the check no written testimony to that effect. 

For writing is, after all, only a very convenient proof of an act of a, 
person. And because it is such a convenient evidence of a deed — of an. 
agreement -custom demands it in such eases as the one I have given. 

To show still more clearly the minor importance of the mere writing,, 
I recall a case where a man who had signed a note wherein he promised* 
not to pay it, the ' ' not " being obviously put in for a fraudulent purpose,, 
was held obliged to pay it, because he really owed it. 



408 PRACTICAL BANKING. 

in pencil, permitted his daughter to trace over the signature with ink. 
The signature was held to be valid. 

Another important signature fact is that an attorney, if he has 
authority of the right character, may sign the name of his principal 
without expressing that he has so done under a power of attorney or 
by procuration. 

This practice is not one to be recommended, since it leads to con- 
fusion in the matter of discriminating regarding signatures. 

A bank was at one time in the habit of receiving for collection the 
cotton drafts of a certain Southern dealer. Drawees found that these 
individual drafts varied in the character of the signature of the drawer 
and hesitated to honor them. The bank finally discovered that this 
drawer, who was an illiterate man, employed other men to sign his 
name on notes and drafts, under powers not requiring that their agency 
should be expressed in the signature. 

A MARK AS GOOD AS A NAME. 

Says Blackstone : " The method of the Saxons was for such as could 
-write to inscribe their names, and whether they could write or not, to 
affix the sign of the cross ; which custom our illiterate vulgar do, for 
the most part, this day keep up, by signing a cross for their mark when 
unable to write their names. " 

Checks are endorsed, notes are signed, dividends are receipted for, 
and all kinds of vouchers given and documents executed by what may 
be termed the signature of a mark. 

Although many banks and bankers take the ground that special 
guarantees are required for endorsements by attorney and procuration, 
no one well informed in this regard will claim that there is any need 
ior a special guarantee of an endorsement by mark. 

In common and statute law and by legal decisions and business 
customs, a formally executed signature by mark is recognized as just as 
binding and as regular as a clearly written and acknowledged signa- 
ture. The law fully prescribes the form in which the signature by 
mark shall be executed, and tradition and custom have united in 
agreeing upon its general style. Where a signature by mark is to be 
made and accepted, some person who can write records the name of 
the party who is seeking to give his sign-manual. Then a mark is 
made in the middle of the name by the would-be signer. If he is 
incapacitated from even making a simple mark he may touch or hold 
the top of the pen as the mark is being made for him. 

As regards the mark itself, there are no rigid rules governing its 
style or shape . It may be in the form of the rude cross of the Saxon 
signer or it may be little more than the thumb mark of the middle 
ages. Anything that signifies a signature will pass if witnessed, for the 
law demands that a mark shall always be witnessed. To make this 
matter perfectly clear a form is here given showing an endorsement by 
ii} ark, as made on the back of a check that had been drawn payable 



EVERYDAY QUESTIONS AND OTHER MATTERS. 409 

to the order of a party who, for some reason or other, had to make his 
witness mark : 








The proportion of persons doing business with our banks who can- 
not make a written signature is small, yet there are few bankers who 
have not had, at one time or another, to help along through this mark- 
making some collector of a dividend or indorser of a check. 

The plan of getting up a signature by mark came from England, 
and it is quite an institution there. On one occasion about half the 
agricultural laborers in an average rural district signed a political 
petition by their marks. 

Notwithstanding the good bank authorization given this style of 
''writing" it is by no means a form of penmanship to be recom- 
mended. No person who is not physically disqualified from using a 
pen, should make a "mark" in this country of free evening schools 

for adults. 

IMPORTANT AND VALUABLE SIGNATURES. 

In another place has been described the use of the Paying-Teller's 
common signature book — the index reference volume in which is 
recorded the signatures of all regular depositors, including, in cases of 
check-drawing firms with partners, the autograph of each individual 
member of the concern. 

There is another class of signatures that might well be included in 
this book. I refer to the signatures of the Cashiers and Presidents of 
all the banks in the town in which the institution is located and the 
signatures of the bankers with whom it is constantly dealing. 

From time to time, Assistant Cashiers are appointed in these near- 
by banks whose signatures are liable to crop out spasmodically on cer- 
tifications and Cashier's checks. When these Assistant Cashiers are 
appointed, the banks commissioning them send to their correspondents 
a circular announcing the appointment and containing the new signa- 
ture. These circulars should be carefully preserved in the Paying- 
Teller's signature book, so that he may not be forced to rely solely on 
his memory when the signatures in question turn up, and that the 
deputies in his department, who do his work in his absence, may not 
have to send around to banks to enquire whether such and such a man, 
signing as Assistant Cashier, is a duly authorized signer for the bank. 

There is still a third set of signatures in which the bank takes an 



410 PRACTICAL BANKING. 

interest and of which, what we may call standard specimens, should be 
readily accessible. In buying notes and acceptances of dealers and 
brokers in paper banks have, in many instances, no positive means of 
knowing whether or not the names on the paper are genuine. In this 
matter they are often obliged to rely solely upon the generally satis- 
factory appearance of the notes or bills, and the good repute of the 
parties offering the paper for sale. But, in many cases, or, at least, in 
some cases, as I have known from actual experience in the premises, 
bank managers would be glad to have some handy opportunity of 
corroborating their impressions in this matter of the signatures of the 
paper they are buying, and the men they are dealing with. 

The difficulty of judging in this matter of signatures is, of course, 
complicated by the facts that the signatures of many houses are often 
made by different members of the concern, and that the taking in of 
new partners and withdrawal of old ones, leads also to changes in 
their sign manual ; so that a memory of what had *been the usual 
signature of a firm might not be of the least service when con- 
fronted by a signature made by some recently admitted member of 
the house. While it might not be practicable to have every bank 
equip itself with full sets of so extensive a line of signatures as this 
would necessarily be, yet I believe it would be quite possible and 
a very good idea to have the signatures of leading houses, whose names 
are liable to be often afloat upon promises to pay, a matter of central 
record. Could there not be, for example, in a city like New York, 
some central point like its Clearing House or Chamber of Commerce, 
where a book of signatures might be kept in careful custody, in which 
book there should be an indexed list of the signatures which we have 
described as belonging to the class most liable to be often in request 
for examination and comparison? 

By a little care and persistence on the part of the banks it would 
soon become a custom for business houses on starting to send their 
authorized signatures to this point of inquiry, and to continue to send 
there changes in their styles of signing, as they from time to time took 
place. 

And here might also well be kept proofs of authority to sign by 
attorneyship, and procuration, existing among these leading business 
houses. 

Bank managers are continually being annoyed and delayed by the 
claims of individuals to sign in these last-named capacities, when these 
managers have not at their immediate command the means of verify- 
ing the correctness of the proffered signatures. 

HOW DO THEY STAND? 

There is no question more familiar to the ears of the banker than 

this simple, expressive and most direct inquiry. There are times 

when, and circumstances under which, it is his duty to endeavor to 

respond, to the best of his ability, to questions of this character; there 



EVERYDAY QUESTIONS AND OTHER MATTERS. 411 

are also occasions when it is not necessary for him to make any great 
exertions to reply to them. 

The manager of a bank, who receives from valued correspondents 
and depositors requests to ' ' enquire up " a house, considers it a part of 
his legitimate business as a banker to answer such requests as fully 
and as promptly as possible. But it is neither his duty nor within 
his province, to endeavor to enlighten every wandering paper buyer 
who strays within his bank in search of a little information regarding 
the standing of some paper which he is hesitating whether to purchase 
or not, and about which he has already enquired in many quarters. 
He is especially unwise to attempt to volunteer information in the 
premises when the enquirer, to whom he is under no business obliga- 
tions, has legitimate opportunities of his own for knowing just as much 
about" the notes or acceptances in question as any one else. 

Discussion of credits in banking circles is sometimes very delicate 
business. Particularly is this the case when the concerns under con- 
sideration are makers of a large amount of paper, and doing such a 
broad business that any estimate of their standing must be based more 
upon instinct — individual impression and knowledge of them of the 
most general character — than upon a special and accurate acquain- 
tance with the real condition of the houses. Cases coming within this 
category are vastly more common in these days of expanded credits 
and immense concentrations of business than they were in years past. 

Regarding some of the houses which give the most paper and are 
the most enquired about by everybody, it may be said that the verdict 
upon their standing by the most experienced of bankers in the vicinity 
amounts to little more than an individual opinion, based upon the 
most uncertain knowledge. It is neither wise nor safe for a banker 
to pass along such opinions unless into the ears of those with whom 
he has the most confidential business relations. 

This matter in many cases must be left to rest in about this way : 
To the enquiry of casual investigators of credits, who have no claims 
for any special assistance in the work of discriminating in their pur- 
chase of paper, the banker must often only reply that he thinks the 
paper stands well, but that he really does not know more about it, 
and has no means of knowing more about it, than the enquirer. 
And he can make such a reply in good faith, even though he may 
be himself hesitating to take the very paper in question because ho 
feels he does not know enough about it, and under those circumstances 
is getting an impression that he does not want more. For that is the 
very point I wish particularly noticed, that such impressions or instincts, 
while they may be made a basis of action on the part of their pos- 
sessor, are not to be carelessly passed over to others. 

DISCOUNTS FOR SHAREHOLDERS. 

One provision of the National Bank Act is as follows: "No bank 
shall loan or discount on the security of shares in its own capital stock 



412 PRACTICAL BANKING. 

unless such security or purchase shall be necessary to prevent loss upon 
& debt previously contracted in good faith." "When shares are taken 
under the contingency last named the Bank Act demands that they 
be sold within six months. This provision has some points to recom- 
mend it, but it is open to serious objections. Every practical banker 
knows that cases are often coming up where deserving shareholders 
who are little accustomed to negotiating loans, and seldom in want of 
bank accommodation, very naturally come to " their bank " (that is, 
to the bank in which they are old shareholders) with their stock certi- 
ficates, asking for some temporary advance of money on their shares. 
In instances of this kind first-class security is offered by parties who 
seem to have a reasonable claim for loans. They may have no other 
collaterals to offer, and, unless the bank can introduce them to some 
other bank where these shares can be legally pledged, such applicants 
must go away disappointed. As these negotiations are almost always 
of a moderate size it is possible that a practical way out of the difficulty 
might be found in an amendment to the Bank Act permitting banks to 
loan limited sums to any one person upon a pledge of their own shares. 
The ideas of the original framers of the Bank Act were correct enough 
in theory. They wished to prevent promoters of banking schemes 
from having an opportunity of carrying along their unpaid shares in 
the loans of the banks which issued them. 

CAN NATIONAL BANKS ACCEPT TIME DRAFTS? 
Some of these banks have been in the habit of so doing, and are 
doing it at this very time, but the practice is one not to be recom- 
mended and not consonant with the principles of sound banking. Our 
question, however, is not whether it is the best banking, but whether 
it is or is not illegal and contrary to the provisions of the United States 
Bank Act. Opinions of the Banking Department at Washington, as 
given by the Comptrollers of the Currency who have from time to 
time expressed their views on the question before us, are not neces- 
sarily law. The decisions of the Comptrollers in this and other bank 
matters are in the nature of suggestions and recommendations, and, 
as far as they are positively in line with the letter of the United States 
laws under which banks exist, can be strictly enforced, and no further. 
Banks are supposed to read and study the laws for themselves, and 
to be directly responsible to the Government for their administration 
under those laws. They are not governed by the simple opinions of 
the meaning of those laws, as from time to time promulgated by vari- 
ous Comptrollers of the Currency, but they make their exegesis of 
them for themselves and govern themselves accordingly. Thus much 
we have premised, because it is well understood that nearly every 
Comptroller of the Currency has taken the following view of the 
question : "It has always been held by this office that National banks 
have not the right given them by law to take on any obligation for the 
payment of money in which the element of time exists; in other words, 



EVERYDAY QUESTIONS AND OTHER MATTERS. 413 

that National banks are accountable on demand, without notice, for 
all debts which they can legally assume, and that they cannot legally 
create any liability not payable on demand." Thus much for the 
Comptrollers' decisions. But notwithstanding these decisions National 
banks are, as we have said, accepting by then* Presidents or Cashiers, 
time drafts, and have not been enjoined for so doing simply from the 
fact that Comptrollers cannot see anything in the Bank Act making 
the practice illegal. And there is nothing in the Bank Act absolutely 
prohibiting the acceptance of depositors' time checks upon National 
banks, yet such a method is certainly not in harmony with the spirit 
of the National Bank Act or consonant with the generally received 
ideas of what constitutes good banking, and it is to be hoped that 
the Act will some day be amended so as to make the practice positively 
unlawful. 

There have been periods when National bank acceptances of the 
class in question have been hawked about the streets of some of our 
cities, much to the discredit of the banks which stood upon them as ac- 
ceptors and the merchants and bankers who were the drawers of the 
paper. The circulation of this questionable sort of paper has always 
led to inquiries of the Banking Department at Washington as to its 
regularity and legality. Although the Comptrollers of the Currency 
have condemned the issue of vouchers of this description they have not 
been able to find any positive laws for their suppression. But they 
have generally suppressed themselves, for both the accepting banks 
and the time-drawing depositors who have figured upon this class of 
paper have in most instances made an early entrance into bankruptcy, 
and the issue of the objectionable "kites" discussed has usually been 
deemed an indication of the approaching collapse of all concerned in 

them. 

RIGHT TO USB THE TERM "BANK." 

Cases are not rare in the various States where single individuals 
or firms doing business as private, unincorporated concerns, assume 
the name "bank." Thus, for instance, Robert Smith, located in Red 
Brook, Dakota, and running a country variety store on a capital of 
§3,000, may conclude to attach a banking and collection business to 
his merchandise trade. He assumes the name of Bank of Red Brook, 
and sends out soliciting letters and circulars so headed, and gets his 
"bank" registered as such in various lists which are in use by the 
business community. This method is not in accordance with the 
spirit of common law, although there may not be in all the States 
statute laws prohibiting such action. There is an air of false pretense 
about it which should render it open to condemnation. 

In New York, New England and some other States the title 
"bank" can be lawfully used only by duly incorporated banks which 
are organized and conducted under the provisions and restrictions of 
the State banking laws. A State bank, therefore, is one which makes 
sworn reports of its condition as required and otherwise conforms to 



414 PRACTICAL BANKING. 

the State law governing it. In certain States there are banks author- 
ized under special charters, general copartnership laws etc. , but which 
make no report of their condition worthy of the name — these cannot 
rightfully be called State banks. 

ACCOMMODATION SIGNATURES. 

Presidents' and Cashiers' signatures are often in great request on 
petitions and recommendations, but these officials should be exceed- 
ingly careful in this matter of name-lending, since, after all, their 
official names are really not their own property, but rather the prop- 
erty of the institutions which employ them, and which have selected 
them as their managers and given them their banking titles, so they 
ought to be very discreet when called upon for their indorsement. 

When a man signs a petition or recommendation as President or 
Cashier of this or that bank he really voices the opinion of his bank — 
something which he has no actual right to do unless he has direct and 
intelligent authority from his bank to thus sign for it, or is positively 
sure it would wish him to sign were the signature circumstances known 
to it, and would fully approve the act. 

There is, without doubt, altogether too much freedom exercised by 
Tbank managers in the matter of which we are speaking, and it is im- 
portant that the point should receive notice. Care should also be 
used in lending the individual name of heads of banks to these docu- 
ments referred to, since the outside public are quite apt to so closely 
connect the individual signatures with their official ones, and to incline 
to view the one just about the same as the other — to think they have 
the recommendation and influence of a bank behind them when they 
have only its manager's private sign-manual. 

It is so easy for a banker to fling on his name ; it is so much in his 
line ; it is often such a polite and accommodating act ; it costs little, 
and is sometimes so hard to refuse. It is for all these reasons in many 
cases so much easier to do it than not to do it, that it becomes necessary 
to emphasize the duty of not doing it except when it is in every way 
prudent and justifiable. 

The person who is most careful in this matter — who guards scrupu- 
lously the use of his name, and never gives it except after due deliber- 
ation and investigation, and where right and duty authorizes it — will 
find in the end that his name is the one most valued and sought after. 
PROPER USE OP BANKING TERMS. 

An explanation of a few banking terms — or rather an explanation 
of the way certain banking terms in frequent use should be applied — 
may not be out of place : 

1. The word bank. This is a noun of multitude, and can have pro- 
nouns as well as verbs agreeing with it either in the plural or singular 
number. Yet regard should be had in its use to the import of the 
term as conveying unity or plurality of ideas. Gilbart lays down the 
following rules to be observed in the use of the term : ' ' When any 



EVERYDAY QUESTIONS AND OTHER MATTERS. 415 

operation or feeling of the mind is ascribed to a bank the verbs and 
pronouns are placed in the plural, as follows : The Bank of England 
petitioned against this bill, and were heard by counsel; but their 
representations produced no effect." When reference is made to a 
bank simply as an institution the term is considered to belong to the 
singular, as follows : ' ' The Bank of Scotland continued the only bank 
from the date of its establishment in 1695 to 1727. " When the rules 
or habitual acts of a bank are noticed the word belongs to the singular, 
as, ' ' The Provincial Bank allows interest at the rate of 2 per cent. " 
When the word bank is connected with a past participle by means of 
the neuter verb to be it usually belongs to the singular, as, ' ' Suppose a 
bank was enabled to take 6 per cent, on a cash credit instead of 4." 
When the word bank is preceded by the indefinite article a or an, by 
the demonstrative pronoun this or that, or by the words each, any, 
every one, it belongs to the singular, as, "Suppose one bank in Scotland 
made its notes payable in Scotland at the place where the notes were 
issued." When the word bank is introduced in either the singular or 
the plural number the same number should be preserved throughout 
the sentence. Hence, the following sentence of Smollett's is inaccurate : 
1 ' By the same acts the bank was required to advance a sum of not 
exceeding £2,500,000 towards discharging the National debt, if wanted, 
on condition that they should have £5 per cent, for as much as they 
might advance redeemed by Parliament. " When the word bank is used 
in the singular number it is considered as a substantive of the neuter 
gender, and hence is associated with the relative pronoun which ; but 
when used in the plural number it implies the idea of persons and has 
accordingly the personal relative who, as, "The bank with which he 
kept his account has stopped payment ; " or, ' ' The bank whose 
interests are affected by the proposed measure have petitioned against 
it." McCulloch, in his "Commercial Dictionary," considers a bank to 
be a lady, for, under an article on banking, he says : ' ' The Bank of 
Ireland draws on London at 20 days. She neither grants cash credit 
nor allows any interest upon deposits ; she discounts at the rate of £5 per 
cent." And it is quite common with English writers to characterize 
the Bank of England as a lady —an old lady ! 

Mr. Gilbart, the writer on banking already quoted, takes the 
ground that, when speaking of the accepter of a bill, the word should 
be spelled in the same way as when speaking of the accepter of a 
present or fee. The Scotch bankers always write this word accepter. 
Says Gilbart : ' ' We do not say the drawor or the payor ; why should 
we say the acceptor f " 

2. In regard to another word the question is raised : Should it be 
written indorse or endorse. Indorse is derived direct from the Latin 
in dorsum, which means "on the back." Endorse comes from the 
Latin through the French endosser. Most legal writers adopt indorse. 

3. Should check or cheque be written ? This word is derived from 



416 PRACTICAL BAKKING. 

the French eches, chess. In England chequers placed at the doors of 
public-houses are intended to represent chess boards, and originally 
denoted that the game of chess was played in those places. Similar 
tables were employed in reckoning money, and hence came the 
expression, ' ' to check on account ;" and the Government office, where 
the accounts were kept, was called the Exchequer. The word cheque 
is in universal use in England. The word check is used in the United 
States, and this mode of spelling is not likely to be changed in this 
country. 

4. Shall we write enclose or inclose when we make up letters, in 
sending away notes, drafts, etc. ? Either word is correct, and the 
writer can consult his own tastes in using them. 

A POINT ABOUT USURY UNDER THE NATIONAL BANK ACT. 

Time and again the National banks have been sued under existing 
State usury laws. These various State laws regarding usurious 
practices are of every hue and character. In some States these 
statutes are of a very severe type — so strict as to make their violation 
prove a very costly thing in case of conviction. But in every instance 
where National banks have been convicted of usury under State 
statutes an appeal to the United States Supreme Court has resulted in 
the reversal of the verdicts of the State courts. The present precise 
status of this usury conflict is this : 

Neither by set off nor original action can interest over legal rates 
paid to a National bank be recovered, except by way of penalty as 
prescribed by the Act of Congress of June 3, 1864. In a word, no 
matter what laws against usurious rates may exist in any given State, 
the National banks in that State, and in all States, can only be suc- 
cessfully proceeded against for usurious practices under what is known 
as the Interest Penalty Act of the United States Revised Statutes. 
This Act provides, that usury shall be punished by a forfeiture of twice 
the amount of interest paid if action is commenced within two years 
of the time of such usurious practice, and that recovery can be had 
for the entire amount of interest paid at any time. 

CAN NATIONAL BANKS BUY PAPER? 

There is no question but that they do, or think they do, almost 
every day; yet, though this question has often been raised in contests 
between banks and parties to whom advances upon notes have been 
made, it is an interesting and important fact, that it has never been 
passed upon or decided by the United States Supreme Court. This 
Court has ruled that paper enters a bank loan either by way of 
a discount or purchase. But, though all purchases of time paper may 
be termed discounts all discounts are not purchases. Where a bank 
discounts paper for a broker who does not endorse it, it may be held 
that the transaction is a purchase. If a bank makes loans to a 
customer upon his endorsed paper, which in addition to any other 



EVERYDAY QUESTIONS AND OTHER MATTERS. 411 

names bears his own endorsement, it may be assumed that the trans- 
action is in the nature of a discount and not of a purchase. But the 
note which enters the loan of a bank either by way of a discount or 
purchase is, in either case, subject to usury laws. Whether or not a 
National bank can buy notes turns, of course, upon the construction of 
the meaning of the word "negotiate " in that section of the Bank Act 
which relates to its powers in the matter of making investments. It is 
there declared that a bank can buy bonds, bullion, etc., and " negoti- 
ate " paper. 

BANK RESERVES. 

There is no question more frequently asked, and none more difficult 
of a short and easily-understood reply, than the one so often levelled 
at bank managers, of *' just what reserves are you obliged to carry 
under the National Bank Act, as it to-day exists, after the many 
amendments it has undergone ? " 

I propose to explain this reserve matter so clearly that the reader,, 
who remembers what T here record, will not again be obliged to ask 
the question alluded to. The reply will come from the standpoint of a 
Boston National bank, and the reserve requirements of National banks 
in the other reserve cities are the same. Outside the reserve cities a 
smaller reserve is required and the proportions of cash reserve and 
funds with reserve agents are different. 

A National bank in Boston is squarely required to keep a reserve 
of 25 per cent, upon its deposits. Before the amendment of the National 
Bank Act, the same bank would have been obliged to hold also a 
reserve of 25 per cent, on all its outstanding circulation. The amend- 
ment releasing the banks from this circulation reserve is quite- 
generally held by thoughtful and unprejudiced financiers to have been 
a rather injudicious one. Under the law as it originally stood, the 
banks were not in the habit of carrying any too much reserve. Under 
the law as it now stands, they are in danger of running along with 
altogether too little lawful money. 

But the methods of making up this item of deposits upon which 
the reserve is to be maintained is what few outside of a bank seem 
capable of understanding, with the explanations so far received, if 
we may judge by the very wild conclusions reached when outside 
attempts at figuring out the reserve conditions are made by writers 
and talkers, who take the published returns of our banks as a basis 
for investigation. 

This deposit item is made up of the individual deposits of the 
bank, after deducting from them the total amount of uncollected 
checks upon other banks which are to be charged in through the next 
morning's clearing, and which, in the published returns of the banks, 
are denominated exchanges for Clearing-House. There was a time 
when this deduction was not allowed; but, after a long contest with 
the Banking Department at Washington, this concession was made., 



418 PRACTICAL BANKING. 

and fully established by a formal decision of the then Comptroller of 
the Currency. To these individual deposits must be added the item 
of dividends unpaid, for we have before us a Comptroller's decision 
that these unpaid dividends must be viewed in the light of sums 
passed to the credit of, and belonging to, depositors — in fact, deposits 
to be called for at any time. 

The last feature of the deposit item is, perhaps, the most difficult 
of explanation, and it is made up of bank balances. A reserve must 
be kept upon the amounts held by any National bank to the credit of 
any other banks if this amount is not fully offset by balances due from 
other National banks, after deducting from that debit sum the 
amounts counted as reserve in banks which are approved reserved 
agencies in New York. 

And now I finish this topic by explaining how a Boston National 
bank may make up this 25 per cent reserve : 

1st. It may deduct, to begin with, from the required 25 per cent., 
the 5 per cent, reserve fund kept in Washington for redemption of 
circulation. 

2d. It may keep in New York, in some National bank or banks 
-approved by the Comptroller for its reserve agent, one-half of this 25 
per cent, reserve remaining after making the deduction just named. 

The balance beyond the authorized or a smaller actual amount held 
"with the reserve agent may be made up as follows : It must consist 
of legal-tenders in the vaults of the bank, or balances due from 
the United States payable on demand ; or gold coin, standard silver 
'Coin, or silver certificates, all of which may be counted as a portion of 
the lawful money reserve. 

There are no restrictions as to the denominations of the legal-tenders 
required as a reserve, though, by a rule of the Boston Clearing-House, 
no legal-tenders under the denomination of $20 are receivable in 
settlement of Clearing-House balances. 

QUERY ABOUT MONEY RESERVE. 

Can a New York city National bank keep one-half of its lawful 
money reserve with some other National bank in the same city ? The 
National Bank Act permits this. This is clearly laid down in Section 
5195 of that Act. The New York banks have not been in the habit of 
availing themselves of the privilege thus given. They carry the whole 
of the 25 per cent, of deposits in lawful money in their own vaults. 
There is nothing to prevent them, if they so choose, from putting 
one-half of this 25 per cent, in the hands of some other National bank 
in New York, where it might be earning some interest. I am perfectly 
well aware that it is claimed that the Comptroller of the Currency has 
construed this reserve law, as far as it refers to the point I have 
in question, differently from the construction I have just given. 
But law is law, and I hardly see how the Comptroller can claim the 
right to say that a section of the Bank Act, which is in no way obscure 



EVERYDAY QUESTIONS AND OTHER MATTERS. 419 

is not to be read and understood according to its letter. The banks 
have the law before them for their guide. Comptrollers' decisions are 
not United States law except so far as they are entirely in harmony 
with the United States statutes. 

It may be said that the reserve agent of a National bank must, in 
order to be acceptable, have the approval of the Comptroller. This is 
law surely ; yet it was thus enacted to help to secure for the National 
banks sound places for the deposit of a portion of their reserve. It 
can hardly be imagined that a Comptroller would disapprove of 
a selected reserve agent on any other ground than a want of 
confidence in the bank thus selected. For illustration : If, accord- 
ing to the provision of the National Bank Act, the Importers & 
Traders' National Bank, of New York, should decide to put one-half 
of its reserve in the National Bank of Commerce, New York, would 
any Comptroller refuse to approve such a reserve agent? If he refused 
to give his approval on the ground that the bank selected was unsafe 
as a reserve agent such a refusal would, of course, seem absurd. If he 
refused because he held that the selection in question was illegal, an 
appeal to the letter of the law itself ought to settle the matter very 
quickly in favor of the action of the New York bank. In case of a 
dispute a recourse would very naturally be had to the Supreme Court, 
and not to Comptrollers' decisions. 

Some person, writing upon the point we have in hand, has said that 
it appears to him that the carrying out of this idea of a New York 
National bank keeping one-half of its reserve in another New York 
National bank would simply result in a general exchange of reserves, 
without profit ; or, as he exactly puts it, ' ' more book-keeping and no 
profit." To make clear the incorrectness of this last statement let me 
give a simple practical illustration. Supposing there were but two 
National banks in New York city, and these were the First National 
and the Second National Banks, each with deposits of $12,000,000. 
Under the law they would each be required to hold a reserve of 
§3,000,000. Let the First National Bank, as the law allows, deposit 
one-half of its $3,000,000 in the Second National Bank, and the Second 
National Bank one-half of its $3,000,000 in the First National Bank, 
each receiving 2 per cent, interest upon the $1,500,000 named, and each 
having, also, $1,500,000 more to loan, less reserve held upon it, at 3 or 
or 4 per cent. , or whatever higher rates it might obtain. Is it not clear 
to see that each bank would make more money than it would if it kept 
its whole $3,000,000 reserve idle in its vaults? 

In discussing this reserve question we have nothing to say about the 
wisdom of a law which permits such a shifting about of reserves as 
described. We do not see anything more absurd in a New York bank 
keeping one-half its reserve in another New York bank, than there is in 
a bank in Boston being allowed by law to keep one-half of its reserve 
in a bank in New York. The question very naturally arises, ' ' Why 



420 PRACTICAL BANKING. 

does this last-named provision of the Bank Act exist ? What is the 
Boston reserve kept in New York for ? v The Boston bank is satisfied 
with the arrangement, becaase it gets interest upon money that would 
otherwise be idle. In the true sense of the word, this New York 
balance is much less a "reserve " for the Boston bank than it would be 
if it was loaned on call in Boston upon pledge of United States bonds 
or equally solid security. 

In Boston, when New York funds are heavy, selling at a large 
discount, as they often do, in close times, it seems a far cry to Wall 
Street. 

In some instances, is it not a fact that this very money which the 
Bank Act calls a reserve of the Boston banks is loaned out on Wall 
Street upon pledge of securities not quite as solid as Governments ? 

BANKING 'WITHOUT LEGAL-TENDER RESERVES. 

Since the abolition of the law requiring a reserve upon the circula- 
tion of National banks, these institutions have been able to slide along, 
with very small stocks of legal-tenders. I give an illustration of 
what might readily occur : 

Banks in certain large cities specified in the Act must keep a reserve 
of 25 per cent, of their deposits, but for banks outside of these cities 
the requirement for reserve is only 15 per cent, of the deposits — two- 
fifths of this to be in the shape of legal-tenders in their own vaults, 
and three-fifths in that of bank balances in redeeming cities. And 
from this 15 per cent, they may deduct the 5 per cent, redemption fund 
on deposit at Washington. 

Suppose the circulation of such a bank to be $200,000, its 5 per 
cent, redemption fund in Washington would amount to $10,000. Then, 
provided it has a rather small line of deposits, say $60, 000, it may 
count its required reserve at 15 per cent, of that, or $9,000. But, 
from this, according to the Comptroller's decision, may be deducted, 
if we may use the expression under the circumstances, the $10, 000 on 
deposit in Washington. It will thus be seen that a bank of the period 
under the present laws may comply with the legal reserve require- 
ments by holding less than nothing in the till. 

WOMEN OP BUSINESS. 
Men of business, often those of comparatively limited experience, 
are sometimes heard speaking unfavorably of woman's capacity for 
doing business, particularly that of a general financial character or in 
the line of banking. A somewhat extended period of practice and 
observation in business, especially in the business of banking and 
finance, will lead any sensible person to take an exception to these 
remarks. The great majority of women have been given few oppor- 
tunities to show what they could do in managing financial matters. 
The average woman of the period has only a spending acquaintance 
with money. She is furnished with more or less of it, but is not 



EVERYDAY QUESTIONS AND OTHER MATTERS. 421 

expected to understand how it is gained or managed. In those 
exceptional cases where women have been called upon to assume 
wider financial responsibilities they have shown skill and ability in 
their management. There are many women who are to-day serving 
faithfully as Treasurers of Savings banks, bank Directors, etc., and 
there are numerous instances where women are doing the entire work, 
as far as business details are concerned, in small banks in the interior. 
The time is undoubtedly approaching when there will be a more 
common employment of women in our National, State and Savings banks. 

There are various classes of work to be done in banks for which 
women have special natural qualifications. Among these are the 
business of handling paper money, assorting checks, folding and 
mailing letters and cutting and trimming new bank-notes. 

The growing practice of using type-writers and stenographers in 
banking is giving to women a very useful sphere in banks. The 
wonderful facility with which an expert type-writer lady will 
manipulate this piano-like aid to correspondence proves to many a 
banker her special fitness for playing upon this invaluable help. 
What may be termed an extremely attractive combination in the 
work of " talking upon paper" in a bank or general business office is 
that of a union of the services of a stenographer and type -writer. The 
hard pressed bank manager or merchant can drive with ease through 
considerable writing by dictating to a stenographer who writes the 
short-hand into type on the type-writer, and women will do for both, 
because they can work as well at stenography as type-writing. 

In discussing the comparative value of male and female help in 
banks and other positions of responsibility the suggestion has been 
made that women are less honest than men — more likely to commit 
breaches of trust than the opposite sex. This idea was recently ad- 
vanced by a lady who had considerable intimacy with the girls, having 
been for many years at the head of a seminary for young ladies. 
She gave it as her decided opinion that girls were more given to petty 
thieving than boys. Possibly her opinion may have had less value 
from the fact that she never had much to do with boys. There is not 
a doubt that this verdict of a woman on women is an unjust one. 

In the great money establishment at Washington is a small army 
of girls who have assorted bills for years. Under former Treasurers 
men had been employed to do this work. The Treasurer of the 
United States says, that losses have been far less under the present 
system of employing female help in assorting than when men did the 
work. He thought the young women had proved themselves more 
honest than the young men. Comparisons in this matter are not 
particularly attractive, but the remark of the lady above quoted has 
provoked them. 

As to the comparative value of women as financial administrators 
many persons claim that their status has been emphatically settled by 



422 PRACTICAL BALING. 

the maladministration and financial diversion of bankers like Mrs. 
Howe. Argument like this overlooks the fact that there have been 
male Mrs. Howes in abundance from the days of the South Sea bubble 
down to the more modern Pacific Bank and Grant & Ward failures. 
PRINCIPAL VERSUS INTEREST. 

He was a man of large experience, having been in active business 
for more than sixty years. By industry, sagacity, and a commendable 
economy, he had accumulated one of the largest properties in the 
place where he lived. While he lingered with me, to draw a dividend 
on the large block of shares which he held, he gave me a bit of advice 
— a specimen of the financial philosophy upon which he said he had 
acted throughout his business career. It was this : 

First, look out for your principal. Make as sure as you possibly 
can, in this world of uncertainties, of its absolute safety, and then 
give attention to the matter of securing, as an income from this 
principal, all the interest you can honorably and honestly. 

He remarked, further, that his observation had been that most men 
thought more of interest than of principal — bestowed their main 
endeavors on getting high rates, and thus neglected a proper care and 
oversight over the main sum in hand. 

The bulk of the disastrous financial failures were, in his opinion, the 
outcome of this unwise mode of engineering money matters. 

This man was a pillar of strength in the wide financial circle in 
which he had so long lived and moved, and his sagacious words would 
here have additional weight were I to mention his name. 

There are few bankers of wide experience who will not, at least 
partially, endorse his testimony. And there are few who will not flatly 
testify that the chronic reluctance of men who have acquired money to 
let it lie idle — unproductive of interest, for even a short time — has 
been one of the most fruitful sources of losses and final disaster. 

Periods of low rates for money are sure to foster wild speculations. 
But the really sagacious man will not be apt to forget, that when 
money is cheap, investments are apt to be dear. He will often choose 
to let his balances lie idle, for long periods, rather than purchase 
shares, bonds, etc., which have been inflated by the plethora of money, 
realizing, what so many are apt to forget, that even slight declines in 
the quotations of his purchases will lay over — wipe out — all the gain 
which was hoped for by keeping the money busy and the income 
continuous. 

There are times when the most profitable investment is that of an 
idle, safe balance at the bank, which, though not accumulating any 
interest, is at the immediate command of its owner. 

"A LONG FIRM." 

This name cannot be very familiar to my readers, though many of 
them will undoubtedly exclaim, before I get through with what I 



EVERYDAY QUESTIONS AND OTHER MATTERS. 423 

propose to say under this heading, that they and misery know well 
what a long firm really is. The title is of English origin. Those 
having to deal with a so-called long firm are pretty sure to find out to 
their cost, before they are done with it, that it is a very short as well 
as a very long firm. 

The origin of the name and class is as follows : 

Some years ago there began to spring up in London, Liverpool, and 
other English cities a set of self-styled commission houses, whose 
partners were adepts in swindling, and who were as destitute of means 
as they were of principle. These concerns were generally manned by 
a large number of partners, who spread themselves abroad quite 
widely. Hence they were early dubbed by those who were victimized 
by them by the name of long firms, which title will be better under- 
stood and appreciated when I have more fully described their 
character and methods of operation. As the scoundrels have been, 
quite successful in engrafting themselves on our leading cities, I 
might as well give the description a fresh, home flavor. 

A house proposing to be one of the class in question will generally 
be found to be made up of men who have suddenly turned up in a 
given city, claiming to have been doing business "somewhere else," 
and that somewhere else so conveniently distant as to render enquiries 
about them slow and difficult. They compliment their latest location 
by saying they are there because they believe the place has excellent 
business facilities, and parade lots of references, which generally turn, 
out to be of the most illusive and intangible character. 

The concern begins business by hiring a store in a good location. If 
they take but one floor, or even a single room on a floor, they emblazon, 
upon their letter-heads, circulars and bills a flattering picture of the 
whole building, well ornamented with their names, thus conveying to 
unwary consignors the impression that they are a very big concern,, 
occupying a very big store. This humbugging stationery they manage 
to scatter widely among producers and shippers at a very early date,, 
hoping thereby to influence consignments. To add to their pretensions; 
they manage to induce some highly respectable bank to permit them 
to open an account, and, by various kiting processes, and frequent 
overdrafts, succeed in doing quite a "banking business," very likely 
talking quite familiarly of "our bank," when they are out of hearing 
of it, and sometimes even going so far as to print its name, entirely 
without permission, among their references. 

By the use of such methods and machinery as we have described. 
the " long firm," which has really neither character, capital, credit nor 
facilities for selling goods at a fair price, and which is almost sure to- 
swindle any consignor who trusts them, often secures many consign- 
ments from interior farmers, manufacturers and dealers. 

When it has gone the full length of its rope in one city, it takes a. 
long jump, and comes up smiling, under a new firm name, in another 



-424 PRACTICAL BANKING. 

city. This exposure of the dark ways of the long firms is the best 
warning against them I can place on record. 

A word or two about some of the details of their rascally business 
may be interesting and instructive. 

A favorite dodge of theirs is to agree to pay a certain price for a lot 
of butter, cheese, or something of the sort, a sample of which has been 
sent them by the shipper, and then ' ' beat " the shipper out of a part 
of his due by swearing the goods are not up to the sample. A heavy 
and most unjust reduction is thus often submitted to, rather than have 
a quarrel, or have the goods thrown back. 

Another ruse of the cheats is to make heavy claims for rebate 
through a cooked-up pretense of short weight. 

But their best hold is to get possession of the goods somehow or 
other, sell them under market price, burst up, and clear off to some 
new field for a commission business. 

The only advice in conclusion is, that it behooves all banks, shippers, 
dealers — all decent business men — to look out sharp for the class of 
swindlers I have described — a class seeming] y on the increase. 

PUBLISHED RATES FOR MONEY. 

There is nothing more confusing to the mind of the average money 
borrower, than the reports of rates of interest upon call and time loans 
which are currently made in the money articles of the commercial 
newspaper to which he pins his faith. A few explanations of the 
•difficulties he encounters, as he endeavors to get at the financial 
situation through an inspection of a daily journal's monetary articles 
written by one who has long been familiar with the work of getting 
up the articles in question, may be of value. 

When the financial writer quotes rates for discount of paper, he 
usually has in view paper of the very choicest class, of the standing of 
which there can be no question whatever, and which will be held by 
parties having first-class facilities for borrowing. 

The notes which the average business man offers his bann are not 
-discounted unless it is believed that they will be paid, yet they may 
not exactly belong to the class of paper just referred to, but are rather 
those types of promises-to-pay so often alluded to in banking circles as 
Ibeing a fair business risk, and which are quite sure of being charged 1 
or 2 per cent, for discount above the iron-clad quotation of the money 
.article. These differences, between real and nominal rates for money, 
are more marked in the London money market than in tins country. 
Thus, I have noticed that London merchants in good standing were 
steadily paying 4 and 5 per cent. , for their bank discounts, when the 
London "Times" was quoting %% percent, as the Bank of England 
rate for 60 days' loans. 

The same apparent inconsistencies exist in the market for mort- 
gages. The borrower reads in a paper that money upon pledges ot 
real estate can be obtained for terms of years at 4 percent., yet he 



EVERYDAY QUESTIONS AND OTHER MATTERS. 425 

may at the same time find himself paying 5 and 6 per cent, for a loan 
for three years upon the very house he is living in. 

In quotations for advances of this description, the figures in the 
newspaper have been based upon operations of great magnitude made 
by Savings banks and trustees, where the property pledged has been 
of the choicest character and the advances made upon it perhaps 
not over 40 per cent, of its assessed value. 

In the call-loan business there are apparent quotation discrepancies 
which need a word or two of explanation. Call loans between banks 
are often quoted at 3 per cent. , when the individual borrower, upon 
first-class securities, is called upon to pay his bank 4 or 5 per cent, for 
demand money. The first-named between-bank call-loans are of large 
round sums of minute money that is put out at one day with the 
full understanding that it is liable to be swept in the next. The 
merchant who borrows call-money from a bank expects to call and 
pay it when it becomes convenient to do so, and some borrowers 
suppose this is why these loans are described as " call-money." 

There is one other point relative to money negotiations to be 
alluded to. The business man who reads in a morning paper that 
money is a perfect drug, and that rates were never so low, often finds 
it hard to effect a discount, even at rates far above those he has seen 
quoted in a journal's money article, simply because of the well-known 
fact that when business is very much depressed and money exceedingly 
sluggish, banks are of necessity obliged to exercise the utmost care in 
discriminating in the matter of credits. 

It may be asked very naturally why writers of money articles do 
not give these varying quotations for varying types of loans, discounts 
and mortgages. The answer to this can be given by saying that no 
well-managed bank or savings institution is in the habit of taking on 
second-class paper or second-class mortgages, nor are borrowers willing 
to concede that they are in the habit of offering to banks either second- 
class notes or second-class real estate security. 

But there are in our money markets various sorts of nominally 
first-class paper and many varieties of number one mortgages. The 
shadings of rates accompanying negotiations of these different types 
of vouchers will easily be discovered by the borrowers who attempt to 
make them. But they cannot readily be classified in any brief 
monetary review. 

SAFETY OP LEGITIMATE BANKING. 

Where banks are managed with care and ability, and confine 
themselves strictly to the legitimate business of banking, they not 
unf requently run along for many years without losing a single dollar 
from their loans. 

Under the old State system of banking, when the banking business 
was conducted in a manner somewhat different from what it is to- 
day, it was not unusual for a bank to move along for fifteen or 



426 PRACTICAL BANKING. 

twenty years without being called upon to charge off a single dollar 
of bad debts. 

Instances of this class have come under my personal observation. 

Banks which have made such a showing as this have, of course, 
had at their head managers of the most faithful and skillful character. 
In illustration of this point, let me give a case from real life in bank- 
ing which at this moment comes to mind. There is no need of 
mentioning names ; and, besides, this case has so many parallels that 
it may fit well in instances not immediately in view: 

The President of the bank had been with it from youth. He 
had served in all its offices from that of messenger upward. For 
forty years he had been, while acting as its Cashier and President, 
its principal manager. In all that time the bank had never paid 
less than 8 per cent, in annual dividends; had often paid more; 
had never passed a single semi-annual dividend. And, since the 
bank's reorganization as a National bank, some twenty years ago, 
it has accumulated a surplus one-half as large as its capital. 
THE POWER OP INTEREST. 

Few persons, even among those who, like bankers are continually 
up to their eyes in interest calculations, fully realize the rapidity with 
which interest grows— accumulates — or fairly gauge its power. Men 
who give notes are usually men of years and experience. Yet those 
most accustomed to the issue of their time promises to pay, are quite 
ready to testify that there is no better reminder of the rapidity with 
which time flies over the heads of busy men than that which comes 
to them when they sign a note of hand for sixty days. And interest 
which grows nights and days and Sundays is accumulating as steadily 
as time flies, where the promises bear this burden of rates. 

Not long ago a Savings bank book, of not very ancient date, say 
about forty years old, was passed around among a circle of experienced 
bankers as a curiosity. It bore one single deposit of ten dollars made 
in 1840 in one of our best Savings banks. The original deposit of ten 
dollars had not been disturbed. It had rolled itself up to the astonish- 
ing sum of $75 or thereabouts. 

Between 1820 and 1830, a man put one hundred dollars into a 
Savings bank near Boston. In a week he drew it out and surrendered 
his pass-book. By an error his account was not charged with the 
withdrawal. And one day the bank, which had in all these years between 
1820 and 1884, been carrying along the hundred dollars, adding to it 
each six months its interest, discovered the error they had made. They 
stumbled on the old, cancelled pass-book. The hundred had grown to 
twelve hundred, which was at once covered into the bank. 

CARE OP CERTIFICATES OF STOCK. 

Banks should take the very best care of all stock certificates that 
come into their hands — not only the certificates of shares of their 



EVERYDAY QUESTIONS AND OTHER MATTERS. 427 

own stock, but stock certificates of all sorts. It is one of the 
very first principles in making transfers of shares on the books of 
a corporation, and issuing new certificates, to demand and take 
possession of the old certificates. 

In making a transfer of stock on one occasion, the intelligent 
lawyer who happened to be acting as attorney in the transfer told 
me, as he passed me over the old certificate, a little incident directly 
illustrating this point of the necessity of taking the best care of a class 
of property which is so often deemed valueless except in the hands of 
its rightful owners. He had been calling upon a client of his, who 
was a prisoner in jail for stealing a parcel of property, a portion of 
which was stock certificates. He asked the prisoner why in the world 
he took those share certificates, when he knew they could be of no 
earthly use to him, since no corporation would transfer them, except 
for their rightful owner, and that the loser's advertisements would at 
once put the corporations on their guard. The rogue replied that he 
found that there were parties in New York who made a practice of 
buying such stolen certificates, at a cheap price, which certificates they 
were in the habit of selling to very ignorant investors, who could be 
easily convinced, by the affixing of some sort of a transfer on their 
backs, that, in buying the certificates, they really got good property. 

This sort of fraudulent traffic naturally reminds one of the well- 
known fact that there are in our cities parties who buy and sell 
perfectly worthless railroad and miscellaneous bonds. This traffic is 
based upon the curious fact that there is a steady demand for these 
bonds to make up assets in cases of scandalous failures. 

NOVEL METHOD OP IDENTIFICATION. 

Good banking often requires payment of checks on identification 
by signatures. The California Bank, of San Francisco, advises Doe & 
Co. , of Baltimore, that it has drawn a check on them for one thousand 
dollars in favor of Robert Smith. The payee being acquainted with no 
one in Baltimore, the bank takes his signature and forwards it with 
the advice of the check to Doe & Co. , thus leading them to infer that 
they are to accept a comparison of signatures as a method of 
identifying the payee. When the payee presents himself he is identified 
in this manner if other circumstances tend to favor his case — that is, 
if the man seems all right and there is nothing to excite suspicion. 
There is another method of procedure of a somewhat novel type, 
adopted by some bankers when a payee desires to travel with his check 
into a strange country and wishes to be sure of collecting it when he 
gets there. In order to place an obstacle in the way of fraud, Cashiers 
have sometimes given the payee an oral password which he could use 
as an identification or as the complement of an identification by signa- 
ture — in the latter case both password and signature being communi- 
cated to the drawee in the letter of advice. 

In the transaction of business by Letter-of-Credit methods, identifi- 



428 PRACTICAL BANKING. 

cation by signature becomes very necessary and important. There 
may be some risk in the operation, yet it is what should be considered 
a fair business risk and proper under certain circumstances. The 
password idea would, however, lessen the risk and should work just as 
well with a Letter of Credit as with a check. 

WORSE THAN A DEFAULTER. 
There was very serious trouble in the Bank. It was dis- 
covered that the Receiving-Teller and Book-keeper, who appeared to 
have worked together dishonestly for a long time, had fled, leaving 
behind them a defalcation of stupendous size for those times, amount- 
ing to more than two hundred thousand dollars. The bank was under 
the management of an able Board of Directors, and, as its business 
was very extensive, it had a large corps of officers. The excitement in 
the management of the bank, among its clerks, and in the community, 
on discovering the defalcation, was very great. Not long after this 
explosion, and while the Directors were still delving into the ruin it 
had left in its track, the very kind-hearted President of the suffering 
institution called into his private room the youngest clerk in his bank, 
a young man about 21, who was a general assistant on a salary of $500. 
The old gentleman and the junior clerk sat down before an open fire 
in the little room. The President then took from his pocket a letter, 
and in a pleasant, fatherly manner read it to the clerk. Its contents 
were to the effect that the junior officer knew all about the defalcation 
while it was being worked up, and had, in fact, been a partner in it, 
participating in its proceeds. The President, having read this missive, 
passed it over to the clerk, who saw at once that this production, 
which was anonymous and written in a disguised hand, was in writing 
familiar to him. He told the President that the letter was evidently 
written by an acquaintance of his, who was a clerk in another bank 
on the street, and who had had a falling out with him in some matter 
connected with an election in a society to which they both belonged, 
and that he hoped he had no need of saying that its statements were 
false in every particular. The good President did not seem to need 
any assurance of this, for he tore the letter in small pieces and threw 
them into the fire, saying no one but himself had seen the letter and 
no one should ever hear more of it. The young clerk remained at that 
bank till he reached the highest position in it. The writer of the 
anonymous letter soon after became a defaulter to a large amount and 

fled the country. 

SYSTEM AND ORDER. 

A manager's desk should be arranged in a neat and orderly 
manner. All papers and documents, not in immediate use, should be 
filed away in their proper places. Nothing tends more directly to 
confusion and delay in the administration of any department than a 
habit of keeping the desk lumbered with a mass of old papers,' cir- 
culars and documents of all sorts. As soon as possible all matters 



EVERYDAY QUESTIONS AND OTHER MATTERS. 42$ 

« 

requiring attention should be attended to, and the papers related 
thereto passed over to the proper officers, or into the proper files, and 
the deck cleared, as it were, for any fresh action. 

"Without doubt there are bankers who have an idea that a 
crowded and overflowing desk indicates a vast mass of business on 
hand and being transacted, but, to the experienced, such signs show a 
want of a proper executive faculty and the absence of prompt and 
orderly ways of doing things. 

The kings of business in this world — the men who are the moving- 
powers behind transactions, mercantile and financial, of the most 
extensive and complicated character — are often men who, from a 
surface view, appear the least busy and the best prepared to take 
direct hold of any matter really deserving their immediate attention. 

I have in mind, at this moment, one of the strongest and most suc- 
cessful business men, whose operations are of The most extensive 
character, who has all his matters, both those of detail and those of 
the widest scope, so well in hand that, when in the midst of business, 
he never seems in a hurry — never seems pressed by anything. On his 
desk are but a few papers. Those few will be rapidly attended to, to 
give place to the next things demanding his notice. 

CIVILITY TO DEPOSITORS. 
Some bank officers in the discharge of their daily duties are brought 
more than others in contact with the customers of the bank. But 
each individual clerk of any bank is almost daily called upon to repre- 
sent his institution in a more or less prominent way in dealing with 
depositors and general patrons. There is nothing more important 
than the practice upon the part of bank officers of courtesy and 
propriety in all business intercourse. The prosperity of their bank 
and their own reputation largely depend upon the character of their 
personal address. Though fully recognizing these facts, it would 
hardly be fair to recommend to bank managers the adoption of a plan 
for maintaining suitable politeness and civility in their corps of officers 
which has been adopted by one enterprising and most successful bank. 
The bank in question has pasted upon its pass-books the following 
notice: "Depositors will please report to the Cashier any want of 
civility upon the part of the Tellers, etc. , of this bank. " A business 
man whose attention was called to this item of financial literature 
rather emphatically characterized it as being of the horse-car 
description. Without wishing to condemn this attempt to place 
matters in good trim in the sphere of duties thus supervised, the 
opinion must be expressed that this printed request is one of the 
things that should be left off the covers of bank pass-books. 

DANIEL WEBSTER ON STATE STREET. 
An office view has been given of Daniel Webster, showing him as 
he appeared when the bank messenger called upon him to collect a 



430 PRACTICAL BANKING. 



draft. Here is a recollection of Mr. Webster on 'Change — as he 
appeared during one of his infrequent visits to State street : 

In appearance, general style and carriage Mr. Webster was one of 
the most remarkable men ever seen on that street. And he was about 
the only man whom the people on 'Change seemed anxious to get a 
good look at when he came among them. When he made his appear- 
ance on State street the word would quickly spread that Mr. Webster 
was coming, and all would want to see him. His presence was majestic 
and entirely unlike that of most men. He seemed to move among the 
crowd as if apart from it and not of it — as one belonging to some other 
order of existence. He would pass along with slow and dignified step, 
his hat drawn low over his broad forehead and his deep-set eyes 
looking out from under his shaggy eye-brows in a kind of dreamy way 
as if their owner found little that was congenial in the moving panorama 
about him. His commanding form and impressive manner would 
cause the most indifferent stranger to turn at once to look at him and 
ask the nearest person who he was. 

BREASTING A PANIC. 
The old gentleman had been for many years the President of a 
leading Boston bank. In his old age he was fond of te ll ing a story of 
his experience with a panic and a panic-stricken man. It happened at 
least fifty years ago, at a time when merchants daily congregated on 
'Change in the open street at 2 o'clock or thereabouts — met there to 
look at each other, make trades and talk over business affairs. It was 
a time of prostration in business. Everybody was depressed over the 
situation. Failures were frequent. The credit of the strongest houses 
was shaken. The banks had become deeply alarmed, and hardly 
knew whom to trust. In the midst of this tremendous financial 
excitement and distress one of the best known merchants in the city 
came to the bank President we have named and told him that he 
believed he should have to fail to-morrow — that he had notes then 
due which he thought he should have to let go to protest. The 
President knew his man quite well — knew his financial condition and 
prospects — so he unhesitatingly gave him this advice : He told him 
he could pull through easily enough if he would only keep up his 
courage and show a bold front. He explained to him that he was a 
marked man in the business community, who was owing considerable 
money, which he might be suddenly called upon to pay if his creditors 
lost confidence in him. The bank President's simple recommendation 
was that he go on 'Change every day regularly and promptly, and 
walk up and down there in the most cheery and indifferent manner — 
make himself conspicuous as a happy and hopeful man as long as the 
panic continued. The alarmed merchant was a man of ability and 
real financial stability. By following the course advised he passed 
unscathed through the fire of the financial trial and also helped others 
along. In the midst of the depression he was pointed out as a tower of 



EVERYDAY QUESTIONS AND OTHER MATTERS. 431 

financial strength. Only two men knew how near he came to failing — 
the President of the bank and himself. 

DEPOSIT EARLY. 

It is a good custom for persons who keep bank accounts, or who 
have any occasion to transact business with banks, to do all their 
business with their banks as early in the day as possible. If notes are 
to be paid, pay them early ; if checks are to be drawn, draw them early ; 
and, if deposits are to be made, make them early. 

Such a way of attending to banking is altogether more comfortable 
and easy for the dealer. In his visits to the bank, in the first hours of 
the day, he will invariably find the bank officers better situated to 
attend to all his wants in the promptest and most cheerful manner, 
than he will later on when the rush and tear of traffic has wearied and 
harassed them, and when their counters are thronged by the chronic 
laggards — customers who would be the last if the bank hours extended 
into midnight. 

A proper regard for, and appreciation of, bank officers and their 
duties, should also lead customers to attend to their daily banking at 
as early an hour as they conveniently can. 

The counter work of a bank is often but the beginning of the work 
which has daily to be done by bank officers, and the nominal business 
hours of the bank are often no gauge of the time of labor of those 
employed there. 

The hardest and longest labor has sometimes to be performed after 
the dealings with customers are at an end — labor in sorting, counting, 
corresponding, recording, settling of cash, and settling of books ; and 
those customers of a bank who, by their promptness, give the bank 
officers an early start on this kind of work do much towards helping 
them along with their daily work. 

SECURITY FOR NATIONAL BANK DEPOSITS. 
The plan suggested, a few years ago, that the United States Govern- 
ment should set aside as security for deposits the money received from 
the banks as tax on circulation, together with the profits accruing to 
the Treasury froin circulation which never comes home for redemption, 
is one which will probably secure attention. Depositors in National 
banks have lost, since the National system started, some $17,000,000 
or $18,000,000 by failures of banks. Here are three facts of interest: 

1. The taxes paid each year to the Government on circulation have been much 
more in every instance than the losses for the corresponding year by depositors in 
National banks. 9 

2. The taxes paid on circulation, since 1865, exceed by more than fifty per cent. 
the total amount of proved claims against insolvent National banks for the same 
time, so that, if the insolvent National banks had had no assets whatever, this tax 
would have paid all their depositors and left $19,877,181 in the Treasury, excluding 
interest. 

3. The taxes paid on circulation are more than six times the losses incurred by 
the public from insolvent National banks, and if these taxes had been applied to the 



432 PRACTICAL BANKING. 

payment of such losses, as is contemplated by a measure recently brought to the 
attention of Congress, such losses would have been paid in full, and the fund remain- 
ing would amount to $48,832,438, disregarding accumulated interest. 

" ULTRA VIRES." 

There are few legal phrases more often used in banking than the 
one which heads this paragraph. Translated, it reads, of course, 
" beyond their strength — beyond their powers." Many a section of 
this volume has shown what duties and offices were within, and what 
not within, the scope of banks and the various officers of banks. 
And the lawsuits which have taken place over these matters have been 
of the most varied and important character. The latest case coming 
under immediate observation illustrates in an amusing manner the 
contests which may arise on such a point : 

The bank had made a bad failure— liabilities large and assets small. 
The President and Cashier attempted to sell the safe belonging to the 
bank to raise money to meet the creditor's demands. The point was 
raised that the power to sell the old safe did not inhere in President or 
Cashier — that only the shareholders could make the sale. The final 
grave ruling of the high Court, to whom the question was referred, 
sustained this point by deciding that Presidents and Cashiers have no 
right, under the circumstances described, to trade off plant. 

POWERS OP ATTORNEY WHICH ARE NOT REVOCABLE. 
The bank was asked to make a loan upon some registered bonds 
belonging to a borrower in a distant State. The applicant for the loan 
sent to the bank a properly drawn and signed note for the amount 
he wished to borrow and the bonds he was offering as collateral, the 
latter accompanied by his power of attorney for the execution of their 
transfer. In considering the matter two points of objection were raised. 
The first was, that there was nothing to prevent the signer of the power 
of attorney from issuing another power of the same tenor to some other 
party, thus rendering the first power of no value. This point was not 
well taken, since no transfer could be obtained without the possession 
of the bonds, and these were in the hands of the bank now considering 
the loan. This point is often raised by comparatively inexperienced 
negotiators who seem to be unaware of the worthlessness of powers of 
attorney unaccompanied by the original vouchers — the share certifi- 
cates, registered bonds, etc. , to which the powers may be applied. The 
other objection raised against the documentary security was as to 
the value the power would be to the bank in case of the death of 
the borrower whose signature it bore. This was a point worthy of 
more serious consideration than the one suggested. The power of 
attorney tendered was a simple power of transfer of the common type. 
Whenever powers of attorney confer an interest in the subject matter 
only and not in the results, and constitute an essential part of a security 
upon the faith of which money or other thing has been advanced or 
liability incurred, they are not revocable, even by the death of the 



EVERYDAY QUESTIONS AND OTHER MATTERS. 433 

principal, but may be thereafter executed where it can be done without 
the name of the principal. 

In view of the correctness of the legal principles laid down, the bank 
concluded to ask the applicant for a power of attorney coupled with a 
conveyance of interest, and here is a copy (see Form 90), of the very- 
satisfactory one which they received that can be used with safety in. 
similar cases : 

For value received I hereby sell, transfer and assign to the. 

- C£>jtyJULj+. JS >xijU(i_A^X)JL () CiO^KtJfL - 

jJLfl-AS^-jos. 3tJoG^u6^xjkK_A AxJJLoov.^ (<q> 1 1 ,000) ..registered water 

bonds of the town of Mansfield, County of Nampden, Md., dated 

JLoooou^x^u. 1 , 1 ^^5 being of $500 each, and numbered 

as follows : 

and authorize .tL>i>^a.A. JR. ^Lg^^jla. to make the transfer on the 

books of said town. 

Witness my hand and seal the 1 Otiv day of Wwu 

A. D 1 <g<|0. 



Witness JL>. G-. cBFJLqu^A j. jy|. JORDOJN. 



Seal. 



Form 90. 
NATIONAL BANKS ASKING FOR AN EXTENSION. 

This seems rather an ominous expression. But it does not in this 
instance, mean anything very disagreeable, as the explanations will show. 

The charters of almost all of the National banks were for the term, 
of 20 years, so that many of them have already reached that limit and 
others are coming to it every month. 

An act of Congress of July 12, 1882, provides means for the 
extension of the corporate existence of the banks. With a few 
exceptions, the National banks of the country will avail themselves 
of these measures. I propose to explain in a few words just how 
they do this. The law in question provides that this renewal can take 
place any time within two years, that is, previous to the date of the 
expiration of their old charter. The first action must be taken by the 
Directors of the bank proposing to extend its life. They must vote to 
advise the shareholders of their banks to avail themselves of the 
privilege of extending the corporate existence of their institution hy 
amending its articles of association in accordance with the provision 
of the extension act I have named. Having passed this vote, the 
next thing is the issue of a circular notice to every shareholder in the; 
bank, asking consent in writing to the extension amendment named.. 



434 PRACTICAL BANKING. 

These replies will be made by calls at the bank in person, where the 
necessary papers will be signed, or by sending in powers of attorney 
authorizing the signatures. In case of Savings banks, and all other 
■corporations, which are shareholders, a copy of vote of the Directors, 
'Trustees, or Finance Committee, authorizing the President or Treasurer 
to sign, must be filed with the National bank. Executors, adminis- 
trators, guardians and trustees must also file a certificate of their 
appointment from the Probate Court. 

The powers of attorney used in this extension consent are of the 
ordinary form, and must be witnessed. 

Where the consent of the necessary two-thirds has been obtained, 
non-consenting shareholders have the right to withdraw and to receive 
from the extending bank the duly appraised value of the shares. And, 
if these withdrawing shareholders are not satisfied with the first 
appraisal provided for by the law, they may appeal to the Comptroller 
of the Currency for a revision of the appraisal. 

The last item of this extension business is an application to the 
"Comptroller for an approval of the adopted extension amendment. 
This he grants, after his examiner has thoroughly examined the apply- 
ing bank, and found it "all solid." 

It has been mentioned that the Bank Act provides that the National 
banks can go through these extension movements any time within two 
years of the date of the expiration of their charters, and it may be 
asked, when is the wisest time to begin to re-organize ? That depends 
arpon circumstances ; but it is well to take hold of the matter a little 
earlier than there seems any real necessity for so doing, on account of 
unexpected hitches that may turn up. There is always the possibility 
<of delays from the absence, in distant countries, of large shareholders, 
whose signatures of assent may become a necessity. Then, again, it 
must always take some little time for corporate shareholders to execute 
the necessary assent papers. It should also he borne in mind that bank 
shareholders, of all classes, are apt to be slow in attending to matters 
of the description in question; and, as in the case where share- 
holders' meetings, and similar matters are to be attended to, may need 
a deal of drumming up. Individual banks can judge best their own 
•situation ; but not less than three months had better be taken for the ex- 
tension work, while in many cases six months would be a wiser provision. 

But time moves rapidly with busy banks. They must not forget to 
attend to this business in season; and those banks which can so 
arrange the business will do well to have the papers ready to present 
to shareholders when they come for their semi-annual dividends. 

CONFIDENCE. 

The whole fabric of banking rests upon confidence. Banks and 
private lenders loan their funds upon promises to pay, about which 
they can, as a general thing, and from the nature of things, have 
.littlo really precise and positive information. And, in this connection, 



EVERYDAY QUESTIONS AND OTHER MATTERS. 435 

let me say that there are inany who have little idea of the extent to 
which banks are willing to rely upon the apparently honest, frank 
and open statements of dealers who are borrowers — applicants for 
loans — regarding their own present financial condition and prospects. 
The man who wishes for a discount is certainly better acquainted with 
his own monetary situation than is any outsider ; and it is the com- 
monest thing in the world for the managers of a bank, who are 
considering a loan application, to question the applicant regarding 
his means and schemes, and to rely largely upon the borrower's own 
report of his financial standing. Mercantile Agencies, institutions 
which are exceedingly useful as aids to the banks in the work of discrimi- 
nating in the matter of credits, know well the value of personal 
interviews with business men in making up their ratings ; and these 
agencies invariably go to head-quarters, as well as to other quarters, 
when they are endeavoring to come to a judgment in regard to the 
means, integrity and general credit value of business men. 

Banks which have large lines of paper of a name that is in question, 
will send for the maker of the paper, in the time of doubt and anxiety, 
and, after a careful conference with the individual, will, on the strength 
of the confidence inspired by his own showing, just as like as not 
conclude to help him along through the pinch which is about him by 
loaning him more money. There is no experienced banker who cannot 
recall any number of instances of this sort. And private lenders will, 
as every one knows — private lenders who have a fondness for investing 
in time paper — sleep easily on files of notes with singl#names, in which 
they steadily keep about all the capital they have, although they can 
have little positive knowledge of the strength of their makers. They 
have full confidence in these men, believe what they say about them- 
selves, and have faith in the correctness of that common judgment of 
the business community which gives their men a high reputation for 
honesty, and believes in their ability to meet their engagements. All 
this is very much to the credit of the human race — of human nature. 

Banks do not seem to believe in the existence of total depravity, 
except in occasional individual cases — in instances where men have 
willfully and persistently made false pretenses, and thereby succeeded 
in defrauding trusting bank managers by borrowing money which they 
knew they could never pay, and never intended to pay; or where 
trusted clerks, in responsible positions, have violated all sense of honor 
and honesty by stealing the property of unprotected shareholders. 
ABSENCE OP CONFIDENCE. 

A money — a business — panic is a sudden and serious alarm without 
sufficient cause. In times of panic all confidence seems to be lost. The 
deposits of the banks reel and sink because depositors become anxious 
about the safety of their deposits — lose confidence in the strength and 
stability of institutions in which they have long trusted. 

Under the old State system of banking, circulation was the first to 



436 PRACTICAL BANKING. 

feel the effects of a wild panic. Bill-holders who had never before 
doubted the ability of the issuing banks to redeem their notes, would 
suddenly lose all confidence in this ability, and, as a result, the bank 
notes would come tearing home for redemption in crushing amounts. 

Shrinking resources and distrust, in these periods of panic, combine 
to prevent the banks from discounting ; and causes of precisely the same 
character lead to increased applications for loans and discounts. The 
confusion and alarm is deepened by the idle and malicious gossip of 
the quidnuncs of the street, whose principal occupation is that of 
reporting financial failures, and rumors of failures, and bruiting 
gloomy prognostications— prophecies of worse things to come. In such 
times as these, the best of business men will lose their heads, and the 
best managed banks make mistakes, under the influence of the excite- 
ment in which they are enveloped. Banks, which might just as well 
as not discount for good customers, will shut their discount sheets, and 
wait to see how "things are coming out," and customers who have 
not the slightest need of a loan will press forward to get one, asking, 
as likely as not, for twice as much money as they have any hope of 
getting, for they, too, have lost all confidence, and think it best to 
prepare for the very worst. 

These are only a few of the features of a monetary panic through 
which we pass once in about ten years — periods of fright and disaster 
to which we look back with wonder that such a general want of 
confidence could have prevailed. 

* BANKS AND THE CLERGY. 

I have had occasion in these pages to make mention of the financial 
peculiarities, tastes and leanings of the various classes of depositors 
and outside customers with which the practical banker is daily brought 
in contact. 

There is a point of interest in these premises to which I again wish 
to allude. In making comparisons of individual tastes and traits, as 
shown in banking and financiering, the conclusions reached must be 
of the most general character. All rules have their exceptions ; and 
when we attempt to describe the business ways of a class, it must 
be borne in mind that, in each and every class, there are prominent 
exceptions to the average exponent of that class. There are, for 
illustration, women who are thorough women of business — scholars 
who are as shrewd and practical in their ideas regarding trade and 
finance as if they had been trained to commerce or shop-keeping; and 
clergymen, the class of whom we are now to say a financial word, who 
are most competent managers of money matters. But, as a rule, 
ministers are not strong in this direction. It is not reasonable to 
expect that they should be so. Their training has, by force of circum- 
stances, been of an unworldly character. In their active life they are, 
to be sure, brought in close contact with men of business, yet the view 
they get of them is narrow and one-sided. They move among men who 



EVERYDAY QUESTIONS AND OTHER MATTERS. 437 

have met with various degrees of worldly success, yet they are apt to 
see most of those who have won the prizes in the struggle for material 
things. These they fall in with when they are out of the harness of 
business and surrounded by the happy results of their business strug- 
gles. At such times there are few opportunities for becoming 
acquainted with the nature of the strife through which the successful 
business man has passed as he was making his way to fortune. And 
the result is apt to be, on the whole, that the average clergyman has 
an idea that it is a comparatively easy thing for the average business 
man to make money — to make a good deal more than any minister can 
by preaching and saving. Thrown thus among the wealthy and 
successful people of trade, the preacher often becomes over-anxious 
to accumulate for himself. And, with his half-knowledge of business 
matters, combined with an undue anxiety after accumulations, he 
is seldom content with those extremely safe investments which pay 
low rates of interest. As a result, his savings are often placed in those 
insecure spots which promise large interest, but end often by wrecking 
the principal. 

The experienced banker who has been thrown much among invest- 
ment-seeking clergymen must have noticed that they have generally 
been hard persons to counsel, since they have usually before them 
the two-fold aim — an aim very difficult to reach — of getting high rates 
with iron-clad security. 

WOMEN AT BANKING. 

Men who are fond of making light of the financial abilities of 
women are expected to tell the following old — very old — story : 

Her husband always kept a good balance with his bank — the bank 
where he simply kept a personal account, for he was not in any 
business. He was going on a journey which would necessitate his 
absence for a few weeks. As he turned away from his wife he placed 
in her hands a parcel of blank checks, which he had signed, and told 
her to fill them up and draw them, as her money needs might demand, 
and then he departed. 

On his return he was confronted by his bank with a notice of an 
overdraft. On conferring with his wife relative to this matter she 
naively explained to him that the bank had made a mistake ; that she 
could not by any possibility have overdrawn the account since she had 
not used up all the checks her husband had given her ! ! 

It is a classical saying that all very good stories are lies. I think 
this last may not be an exception. 

Here is a story of methods in banking — the methods of a man — 
which is entirely true. It came under my personal observation, and I 
introduce it here because it shows that men as well as women may 
make curious work of check-drawing. 

He was a dealer in merchandise in Boston. A party in a town in 
Maine owed him two hundred dollars for goods purchased. The 



438 PRACTICAL BANKING. 

debtor advised the Boston creditor that he might draw on him for the 
amount through a bank located near the debtor's home. The Boston 
man sat down and deliberately drew a check for $200 on the Maine 
bank, and signed to the check the name of the Maine man who owed 
him the two hundred. This ignorantly-forged check the Boston man 
actually lodged in his bank in Boston for collection. Fortunately for 
him the officers of his bank happened to notice his blunder and 
stopped its further progress. 

WHAT CONSTITUTES A SHAREHOLDER IN A BANK. 

In the matter of qualifying as a Director in a National bank, 
working under an Act of the United States demanding as a property 
qualification for a Director's position a proprietorship of at least ten 
shares of the stock of the bank, it is the best and most regular way for 
the candidate to buy his ten shares for cash, have them duly trans- 
ferred to him on the books of the bank and a certificate issued in the 
usual form. 

As it might be desirable to prove proprietorship in some other 
contingencies or circumstances when some of the usual methods had 
not been conformed to, it may be important to note what steps in the 
acquisition may be waived. The transfer is absolutely essential, yet 
the matter of taking out the certificate (the voucher) of the stock is 
not necessary. Neither is it absolutely necessary, in cases where stock 
has been subscribed for in a corporation, that it should be paid for. 
The bank has a right to give credit for the stock and to make, as it 
were, a loan in this as in any other regular way. Rulings to this 
effect are on record in cases under State banking laws. As National 
banks are not allowed by the Bank Act to make advances upon their 
own shares, this matter of estabhshing a stockholdership where a 
stockholder has not paid his assessments would probably have a 
different aspect in a National bank. 

BANK ACCOUNTS WITH ADMINISTRATORS. 

Bank accounts with administrators, executors, and other classes of 
representatives of the estates of deceased depositors are a common 
feature of practical banking. 

The old accounts — the running accounts with the person who is dead 
— are closed in the following way : As soon as the bank hears of the 
decease, it ceases to pay outstanding checks which have been drawn by 
the party who is dead. The death does not affect the validity of the 
checks as far as the drawer is concerned. They are perfectly good as 
a demand against his estate ; but the bank has no right to pay them. 
If it does pay them, after the death of the drawer, while in ignorance 
of the fact of the death — pay them innocently — equity, if not law, will 
undoubtedly protect them from any loss on account of such action. 

I ought to remark here that there are high authorities who take the 
ground that death does not authorize a bank to refuse the payment of 



EVERYDAY QUESTIONS AND OTHER MATTERS. 439* 

a check duly issued for a proper consideration ; but the balance of the 
law and testimony is against such an opinion. Massachusetts is the 
only State where payment of checks of deceased persons is authorized 
by statute. 

On the presentation to the bank, where the balance of cash of the 
deceased party remains, of a proper certificate from a Probate office 
that the estate has been placed in the hands of an executor or adminis- 
trator, that representative of the estate can draw the balance, and 
open, if he pleases, a new account with the bank in his name as adminis- 
trator or executor. The bank takes the probate paper and places it on 
file, takes a proper identification of the new depositor — the administrator 
— and takes also his signature on the Paying-Teller's signature book. 
The new pass-book to the new depositor is then issued. If any out- 
standing checks of the party deceased subsequently come into the bank 
the presentors of such are referred to the administrator, who will, if 
they are all right, issue new checks in exchange for the old. 

Bank managers should bear in mind that it is always necessary to> 
specify, in opening accounts of the class we are describing, the names 
of the estates thus represented, as well as the names of their representa- 
tives. 

NEWSPAPER MONEY ARTICLES. 

Bankers everywhere generally begin their business day by reading- 
the newspapers or by glancing over them. Before they commence the 
day's work it is positively necessary for them to know how business, 
political and social affairs are drifting in the theatre of their operations. 
And now that steam and electricity have clasped the globe in their 
embrace and made it as one solid and compact business whole, the entire 
world may be termed the stamping ground of the broad-minded banker 
of the period. But the banker in reading his daily journal will linger 
the longest over the financial articles — the monetary columns. Tq 
know how to read and study these reports becomes to him a special 
art ; and how to properly discriminate between the wheat and the chafl: 
of many of them demands sagacity and long experience — for it must 
be confessed that the chaff predominates in too many of the money 
articles of the daily paper of the period. 

Many of the leading daily journals of this country and England 
have regular reports upon the money and stock markets of the day 
which are marvels in the extent of their sweep, the value of their 
statistics, and the sagacity and depth of their reflections and sug- 
gestions. 

I have long been in the habit of daily looking over the monetary 
column of the London " Times " and I am inclined to place this stately 
financial article at the head of its class. But there are journals in 
this country which come close to it in point of ability in conducting; 
this feature of their columns. 

The bane of a money article is, of course, any absence of honesty 



440 PRACTICAL BANKING. 

;and reliability which is the outcome of a want of honesty and reliability 
In its writer consequent upon bearings which are prompted by his 
self-interest in the stocks and bonds which he discusses. This self- 
interest may be both direct and indirect. It is direct, when the writer 
passes a verdict upon the condition and prospects of securities in 
which he, or the clique to which he belongs, is holding either long or 
short interests. It is an indirect interest which controls his pen, when 
it has been corrupted by the money and influence of others who have 
a direct interest in the stocks and bonds about which he is writing. 

The position of money- writer on a leading daily journal is one of 
great temptation, and of these press workers some have gone down 
before them. The comparatively small income of the money-editor, 
from his legitimate occupation, which is that of giving a candid and 
impartial daily resume of the money and stock markets, may be, by the 
contributions of corrupting stock operators, swollen to princely propor- 
tions. Or this writer may, as we have hinted, be an operator himself, 
and prostitute his column on behalf of his own direct interests. His 
victims are those readers who have the most implicit confidence in him, 
and who readily rely upon his opinions without a thought that his 
verdicts are to be received with caution and suspicion because a 
selfish end is to be read between their lines. 

THE AGE OF BANK OFFICERS. 

I have known instances where men ninety years of age have been 
Ibank Presidents and carried themselves well in the position even at 
that advanced age. I have also known Book-keepers in banks who had 
seen more than fifty years' uninterrupted service at their desks. Not 
long ago, an able business man who had just been chosen for the first 
lime in his life to act as the working President of a large bank, and 
who seemed as active and young as most men of fifty years of age, 
reported his age to me as over seventy years. In the P ,nk of England 
clerks generally begin their terms of service at the age of eighteen. At 
sixty, if they have served the old bank well, they are entitled to a 
pension. 

A good story bearing upon this point of age in the matter of bank 

service is told of the late distinguished President of the Bank, 

of . This man had often held forth at the meetings of his Board 

in declaration of the idea that no man under any circumstances — no 
matter how apparently superior his qualifications might be — was fit 
to be President of a bank after he was seventy years old. At such an 
age, he would say, a man in a President's place is sure to be too 
conservative— too slow — behind the times. These sentiments he 
invariably emphasized by announcing that, as for himself, he should 
positively retire when he reached the age of seventy, and he wished 
the Directors to be sure and remember this. By-and-by the prescribed 
time came, and the Board, which had not grown over-fond of their 
"Chairman, began to look around for another man to take his place. 



EVERYDAY QUESTIONS AND OTHER MATTERS. ,441 

This movement soon came to the ears of the old President. He was 
quite indignant. Entering a meeting of his Board one day, he passed 
over to them in sharp manner the keys of the bank and his immediate 
resignation, saying as he did so, that they were an ungrateful set of men. 

SETTLING OF OLD SCORES. 

I have elsewhere spoken of the way long unbalanced pass-books 
will sometimes come home to be balanced at the banks —pass-books 
which have, in some instances, been drifting about in an unsettled form 
for half a life time. 

I have here an instance of a final attempt at restitution and settle- 
ment of a long-standing irregularity in banking which, in its main 
features, is more remarkable than anything of the sort I have ever 
observed. The names and the bank I keep back for fear of disturbing 
the ashes of the departed. On the Directors' records of an old and 
excellent bank in a Northern state is the following record : 

April, 1, 1842.— Voted that the cash be made debtor to profit and loss for $1,000, 
this day received by the Cashier through the postoffice, enclosed in an envelope, 
without signature, and indicating that the same is to make good to the bank a loss 
occasioned by an error of one of its Tellers many years since. The following memo- 
randum was ordered to be entered on the record, viz.: " The envelope named in above 
note contained the following words ' Jno. Robinson's error.' Robinson was formerly 
a Teller in the bank and was discharged in 1807, being a defaulter for a large amount. 
The balance remaining due to the bank, after applying the proceeds of all the property 
surrendered and found belonging to him, being between 9,000 and 10,000 dollars, no 
part of which has ever been paid, and the principal long since charged to the 
Contingent Fund." 

No banker can read this striking old story without wishing that there 
were more instances in which attempts have been made to right the 
banking ' ' errors " of the long past. 

EQUITY. 

In practical banking, as well as in general business, one is continually 
hearing references made to equity practice. I have just heard a 
banker say, when asked what would be the result in a certain com- 
plication of business, that equity, if not law, would give the bank the 
case — would not hold the bank liable in the matter in question. 

A brief word in explanation of law and equity, or rather in explana- 
tion of the difference between the two, will be of interest and value. 
Without doubt there are many very intelligent practical bankers who 
use this term equity without clearly understanding its precise meaning. 

An equity court is a tribunal for the correction of common law, in 
cases in which it is deficient, or for the application of the principles of 
natural right and common sense in the work of administering justice. 
Equity comes with its aid in extraordinary cases — cases which are 
exceptions to the general rule. 

The reader must carefully observe that we have confined the sweep 
of equity to the domain of common law. In equity there can be no 
going counter to statute law — no correction of it, no stepping outside 



442 PRACTICAL BACKING. 

of it — no matter how apparently exceptional and extraordinary may be 
the cases under consideration. Equity is, in fact entirely subservient 
to statute law. 

In plain, business-like terms, what is this common law which may 
be, in some cases, corrected and improved on by equity ? 

Our common law is our unwritten law, or that body of customs, 
rules and maxims which have taken on the binding power and force of 
law in consequence of long usage and recognition by judicial decisions, 
and not by reason of statutes now extant. 

When an eminent lawyer was asked to give the origin of common 
law, he replied that it was as undescribable as the head of the Nile. 

SAVINGS BANK MANAGERS. 

There is a point about the general management of the average 
Savings bank of the period which has for a long time attracted the 
attention of observing investors and financiers. The point in question 
is this: Savings banks are, in very many cases, managed — "run" — by 
a single man. This one manager is often the Treasurer, or he may be 
the President, or perhaps a leading Director or Trustee. 

Institutions of the character we are considering, which were 
constituted for the purpose of being the most careful and conservative 
custodians of moneys belonging to the most unprotected classes of 
investors — poor people, uneducated in financial matters, widows, 
orphans, etc. — should be managed upon the soundest principles of 
financial administration. 

And experience has fully proved that the method of individual 
control, of which we have spoken, is one having in it many elements 
of danger, and one which should therefore be carefully guarded 
against in Savings banks. 

In these premises, that safety which comes from the counsel of 
many should be diligently sought for. 

The charters of these banks provide, in nearly all the States, that 
they shall be under the management of many Directors or Trustees. 
These officers should perform the duties for which they were chosen — 
should not become mere men of straw, yielding all the guidance of 
the banks of which they are supposed to be "Directors" into the 
hands of one individual. 

BANK OFFICERS AND AMUSEMENTS. 

Good Dr. Wayland was once asked what pleasures he would recom- 
mend, and he simply replied, "Take a walk." The Doctor once said 
another fine thing, which a friend of mine, whose noble career has 
reflected honor upon his old instructor, says has been of more service to 
him than any sentence he has ever heard or read. It was this : ' fc Nothing 
will stand against days' works." That is, if you have a great work to 
do, keep resolutely at it, day by day, and you will conquer it. 

Now a word about the amusement question. The most reliable, 



EVERYDAY QUESTIONS AND OTHER MATTERS. 443 

satisfying and truly recreative amusements which the world affords 
are right about us, accessible to all, and cost nothing. 

There is in these days a tendency greater than ever before, particu- 
larly among our young people, towards making amusements an end 
rather than a means. Whatever spare time out of hours of work and 
sleep that comes to them, is too often looked upon as so much time to 
be spent simply in getting recreation of one sort or another. With 
this sole aim in view dashes are made into all sorts of what the world 
terms play, with a result, in the end, that may be compared to the 
ashes that came to the hands of him who grasped after sweet and 
wholesome fruit. 

A great writer once declared, that the dullest things in the great city 
in which he lived were what that city termed its popular amusements, 
and so he gave them a wide berth, and found enjoyment in the simple, 
incidental pleasures which were the natural outcome of his daily working 
life. 

Theatres, ball rooms and cards may be well enough in their places 
when taken in moderate doses, and the same may be said of the thousand- 
and-one ways in which modern civilization attempts to disport itself ; 
but, after all, a person has got to get his real enjoyment of life out of 
what may be termed the every-day, common-place pleasures of his 
existence. He must be happy over Ms work. The farmer must take 
comfort in following his plough and watching the turning sod, in 
planting his fields and gathering his crops ; the mechanic in seeing the 
products of his skillful hands taking on a comely and useful shape, and 
the student in his studies. And that mind is not in a healthful condition 
which cannot be best refreshed and ministered to, when weary, by a. 
simple walk under the open sky, in the clear atmosphere, and amid 
nature's glorious surroundings. 

SOME FACTS AND FIGURES. 

In the New England States, the National banks are far more 
numerous in proportion to the territory than in any other part of the 
country. At the South and West they are located at much wider 
distances from each other as a general thing. And, in New England, 
Savings banks are more abundant than in other parts of the 
country. New York State still has a considerable number of State 
banking institutions, while, in New England, the sway of the National 
banking law has been well-nigh complete. New York has to day 151 
State banks, with a capital of over twenty-eight millions, according to 
the report of the Bank Superintendent for 1890. 

There have frequently been disputes regarding the date of the origin 
of the State banking system in this country, and the ages of some of 
our first established banks. We place upon record some facts in these 
premises which may be fully relied upon. The first bank established 
in the United States was the Bank of North America, of Philadelphia, 
which was started in 1782 ; the second, the Bank of New York, June, 



444 PRACTICAL BANKING. 

1784 ; the third, the Massachusetts Bank, of Boston, which was started 
one month later in the same year. 

The charter of the Massachusetts Bank was signed by Samuel 
Adams, President of the Senate, and John Hancock, " Gov'r of ye 
Commonwealth," and the first committee of the subscribers for the 
Massachusetts Bank stock were William Phillips, Isaac Smith, 
Jonathan Mason, Thomas Russell, John Lowell and Stephen 
Higginson. This bank commenced business with a capital of $300,000, 
and at once opened accounts with the Bank of North America, Phil- 
adelphia, and Bank of New York, and these accounts are continued to 
the present time. 

To-day the total number of National bank shares is 6,097,983 and 
the number of shareholders 252,358. The great bulk of this stock is, 
of course, held in the United States. 

The Comptroller of the Currency, in a late report stated, however, 
that 6,778 shares in United States National banks were at that date 
held in Great Britain, 3,764 in France, 4,162 in Germany, and 13,735 
in other foreign countries. 

About half of the capital of the National banks is held in the 
Eastern states. 

To-day, in Massachusetts, bank shares are by no means so favorite 
an investment with individual capitalists as they were a few years 
ago. The expenses of their management have been only slightly 
reduced, and must of necessity remain about as they now are, the rate 
of taxation of National bank shares, capital and circulation has not 
been reduced, and there are no prospects of any early reduction, 
w r hile the current profits of these institutions have decreased, owing 
to falling off in interest rates, and general risks of their business in- 
creased, owing to the wide-spread depression of trade and manufactures. 

But National bank shares seem to be just about as popular with the 
Savings banks as ever, and a large proportion of the stock of Boston 
National banks is to-day in the hands of various savings institutions. 

More than one-half of all the National bank stock owned in the 
New England states is held in Massachusetts. 

The whole number of National bank shareholders in the New 
England states is 94,827. 

BANKING IN CANADA. 

I have, in my descriptions of the methods and machinery of banking 
in the United States, made frequent incidental allusions to English 
banking methods, many of which came under my personal observation 
while traveling in Great Britain. 

There are some peculiar features of Canadian banking, which I 
have had an opportunity of looking into, and which interested me 
much, since they seem neither English nor American in their character, 
and perhaps come near being a cross between the two. 

The Canadian banks are in the frequent habit of issuing demand 



EVERYDAY QUESTIONS AND OTHER MATTERS. 445 

and time certificates of deposits, upon which interest is allowed. On 
open — current — accounts they are not generally in the habit of paying 
any interest. 

The great banks of Montreal, etc. , have many branches in small 
cities and towns. These branch banks are under the care of a Manager 
or Agent, assisted by such clerks as he may need. The Manager of one 
of these branches must be a banker of skill and good judgment, since 
he must take a deal of action of an important character on his own 
responsibility. Sometimes an advisory man is appointed by the central 
board for the assistance of the Manager — a man of prominence and 
ability located in the place where the branch exists. 

Canadian banks generally have solicitors, and these, in the case of 
the branch banks, sometimes act as notaries and advisers. The salaries 
of the branch Managers range from $2,000 to $4,000. 

The Manager of the branch bank is relieved of some responsibility 
in the matter of discounts, by a custom which prevails of arranging 
at headquarters that certain lines of discount shall be allowed certain 
specified dealers with the branches. 

Overdrafts were, in former times, often permitted in Canadian 
banks, but few are now permitted. 

The central-chief -banks have a regular official, termed an Inspector, 
who travels around among the branches, making frequent and 
thorough examinations of them — examinations which resemble the 
examinations made in the States by the National bank Examiners. 

Canadian banks, branches and all, make a regular practice of 
dealing in sterling exchange— of drawing on London, etc. 

The bank hours of Canada are from 10 to 3 o'clock, except 
Saturday, when they are from 10 to 1 o'clock. 

Canadian banks fee their Directors for attendance, paying them $10 
or less for being present at Directors' meetings, which are generally 
weekly. 

The officers are bonded, as with us, but the bonds are now almost 
entirely guarantee companies' bonds, the individual bond being well- 
nigh an obsolete thing in the Dominion. 

In England banks make a charge for keeping small accounts. Such 
was once the custom with some banks in New England. There is no 
such custom in Canada. 

Circulating notes of the central banks are issued by the branches, 
after being countersigned by the branches. 

Many of the Canadian banks make their discount customers notify 
all the notes held for them by the bank, furnishing them blanks for 
that purpose. 



446 PRACTICAL BANKING. 



CHAPTER XXVIII. 
INSIDE WORKINGS OF A BANK. 

The following papers were written by a well-known bank officer for publication 
in Rhodes' Journal of Banking, and being in line with Mr. Patten's work and 
supplemental thereto, the articles have been revised for this volume. 

BANK EXAMINATIONS. 

Question: "What is the best method for a bank officer to pursue 
in examining his own institution ?" 

Answer : Bank examinations can be made in various ways and under 
different circumstances. In National banks there are generally one or 
two examinations each year by the United States Bank Examiner who 
examines the institutions to the best of his ability and according to 
rules laid down by the Comptroller of the Currency to whom his 
reports are made. These reports are seldom if ever seen by bank 
officers, and unless the Examiner chooses to inform them that every- 
thing is right they are none the wiser. In State banks examinations 
are made by State Bank Examiners under State laws, but these reports 
are filed with the Banking Department of each State, and of course the 
officers of banks do not have access to them. 

There seems to be a misconception in the mind of the public 
regarding the duties of National and State Bank Examiners, and when 
a bank fails many people blame them for not doing their duty. It 
should be clearly understood that bank examiners are not detectives. 
They cannot go over all the transactions of a bank for a length of 
time, and if a defalcation can be concealed from the officers or 
Directors for a series of years it can hardly be expected that a bank 
Examiner, in the course of an examination made once or twice a year, 
will unearth it. It is true that it is their business to look after such 
things, still they cannot be expected to do impossibilities. 

The officers and Directors of a bank are responsible if anything goes 
wrong, and the blame must rest upon them. 

Banks are examined about dividend time by a committee from the 
Board of Directors. The committee goes over everything in a perfunc- 
tory sort of a way, glances hurriedly through the bills discounted, 
counts the Tellers' cash as best it knows how and perhaps runs up a 
few columns of figures, which really means it has examined the bank's 
liability to the stockholders, but nothing has been done in the way of 
examining its liability to the public, and I venture to say the committee 
never thinks of examining the collection department, the special 



INSIDE WORKINGS OF A BANK. 447 

deposits left for safe keeping, or anything of the kind. I heard of a 
Teller who for a joke once held aside one hundred thousand dollars of 
his cash during an examination by the Directors and it was never 
discovered. 

These examinations in the nature of things must be defective, as 
the Directors are generally active business men and understand the 
granting of credits, but when it comes to the details of a careful bank 
examination it is entirely out of their line. 

In some banks it is the practice to hire experts from other institu- 
tions to make an examination. This is excellent in its way but banks 
have different methods of conducting business. There are many things 
that are difficult for outsiders to comprehend and they are not always 
able to scrutinize the loopholes for defalcations, to say nothing of 
giving away the secrets of your business. This plan is an excellent one 
if it can be carried out, but there is perhaps only one bank in five 
hundred where it can be done to advantage. 

None of these examinations are what is really wanted by the bank 
officer. He sits at his desk all day, his clerks are meeting customers, 
paying checks, receiving deposits, discounting notes, giving out balances, 
and the business of the bank is being conducted in all its departments. 
For all that he knows there may be a defaulter working right under 
his eye, or a man may be making a false entry that very instant. 

A good bank officer wishes many times that he could stop the wheels 
for a day, have every page opened and proved and know that his bank 
is all right. He thinks he understands and is f amiliar with the workings 
of his clerks, their habits, etc., or if he is not he ought to be; and yet 
there is always a desire in his mind for more light. Many officers have 
not been brought up in the business and do not themselves know all 
the details of running a bank, and as they dwell on these things a 
f eeling of helplessness comes over them, and they ask, ' ' How can I best 
examine my bank ? " 

There is no rule for examinations that will make men honest, but 
bank officers should strive by all the means in their power to throw 
such safeguards around employees that they will be better able to resist 
the temptation to do a wrong act. 

The first requisite of a careful bank examination is that the party 
to be examined should not be informed beforehand. If the least chance 
be given for a man to prepare for an examination he can generally do 
so in such a way that the best of systems will be defeated. If the 
Directors purpose sending experts to examine a bank the officers should 
know nothing whetever about it until the Examiners put in an appear- 
ance with their authority. In the system I am about to outline, under 
no circumstances should the desk to be examined be notified five 
minutes before the Examiners are ready to go over the department. 
This must be laid down as an invariable rule. 

The only true way for an officer to examine his bank, it seems to 



448 PRACTICAL BANKING. 

me, is by employing his own clerks to make the examination. This 
can readily be done in nearly every bank, and it has been tried with 
great success in banks of different sizes. The officers should expect to 
pay for an examination, and in this way they will secure the best efforts 
of the parties doing the work and at the same time enable their clerks 
to earn a little extra money, which is always acceptable. 

The officers can generally select a committee from among the clerks 
not employed in the departments to be examined, and it can vary in 
number according to the size of the bank. Select one of the best men 
as Chairman; pay him twice the amount paid each of the other 
members, and throw the burden of the responsibility upon him to see 
that the examination is properly conducted. Make all of your arrange- 
ments beforehand very carefully, and inform the members of the 
committee in time for them to get their work in proper shape. 

We will now suppose that such a committee is to make an examina- 
tion. The Chairman should be provided with written authority from 
one of the officers, as follows : 

To all : Messrs. Drake, Mennie, Hallock, Waterman and Kennedy are hereby appointed 
a Committee of Examination, with authority to examine this bank, at the close of business, 
on December 20, 1890, and Mr. D. B. Hallock is hereby appointed Chairman of said 
Committee, with full authority to carry out all necessary details of such examination. 

{Signed) William Goode, Cashier. 

The Chairman, at the stroke of three, steps into the Paying-Teller's 
department with as many assistants as necessary, and proceeds to 
count the cash; one assistant going to the Receiving-Teller's depart- 
ment, one to the Third Teller's department, one to the Discount 
Department, and the others to the Book-keepers' departments. The 
general Book-keeper should be instructed to take off a proof of the 
general ledger at close of business of that day and hand it to the Chair- 
man. Supposing that the old style of ledger be used, the Examiners 
should take charge of the same, not allowing the Book-keepers to 
touch them until every balance has been struck and carefully taken 
off. The postings should be gotten up for that day's work, and as 
many balances as possible should be taken off that evening, working 
as far into the night as is necessary. The ledgers should then either 
be put in a safe, where the Book-keepers cannot have access to them, 
or put under seal, and the Examiners should come to the bank the 
following morning at an early hour, and take off the rest of the 
balances, so as not to interfere with the day's business. They can at 
their leisure, during the next few days, find the differences, making a 
careful note against each account of what the difference consists, which 
they will include in their signed report to the officer. 

The Chairman should be furnished with the following instructions 
for examination of the different departments : 

PAYING-TELLER. 

• 1st. Count all cash and see that it agrees with the amounts called 
for by the Paying-Teller's proof. 



INSIDE WORKINGS OF A BANK. 449* 

• 2d. Carefully list all checks that have been paid by the Paying- 
Teller that day, and see that the total equals the amount caDed for by 
his books. 

• 3d. Scrutinize all charges made by him to the other Tellers, all casbi 
items, so-called, receipts for currency shipped, Clearing-House trans- 
actions, and any entry from his desk that is out of the usual course of 
business. 

4th. See what tickets, if any, are held in his cash, and make 
careful report of such. 

5th. See that the total amount of cash on hand, with the amount 
of checks paid by him during the day and the amounts charged to the 
other Tellers or different departments of the bank, equals the total 
amount of his cash at the close of business on the previous day. 
receiving-teller's department. 

• 1st. Count all cash and see that it agrees with the amount called 
for by Receiving-Teller's proof. 

2d. Look back and list all checks drawn on other banks received on 
deposit during the day, and if a Clearing-House bank, look back all 
checks intended for the Clearing-House and see that they are properly 
listed and the amounts correctly transferred to the Clearing-House 
sheet. 

3d. Examine carefully items called city and foreign office and see 
that nothing is being held which is not collectible the next day or which. 
is not in shape to be charged to the different correspondents of the; 
bank. 

4th. List all checks on your bank received on deposit during the 
day and see that they, together with the checks on other banks, city 
and foreign office, and cash equal the total amount of deposits received., 
which should also be carefully listed and tickets footed. 

In looking back checks drawn on other banks, great care should be 
exercised to see that none are fictitious and that all are properly 
accounted for as coming through some department of the bank. 

THIRD TELLER'S DEPARTMENT. 

1st. Count the cash. 

2d. Carefully check all charges made to out-of-town correspond- 
ents from the foreign office of the previous day, proving same. 

3d. Carefully check city office of the previous day and see that every- 
thing has been collected which is called for by the proof of that day. 

4th. Carefully call back all mail received on day of examination 
and see that proper entries have been made for same, and if a Clearing- 
House bank carefully prove the additions to the Clearing-House sheet.. 

5th. Scrutinize all items appearing on his books as coming from 
any department in the bank and check back to their source. 

6th. See that nothing has been charged to him by the other Tellers 
or charged by him to them which has not been properly entered. 

Great care should be used to see that all checks handled by him. 



450 PRACTICAL BANKING. 

are bona fide, and that there are no checks in his department taken 
from mail that have not been credited. 

Examine all notes left for collection, past-due items of all descrip- 
tions, and anything on the desk of irregular order. 

DISCOUNT DEPARTMENT. 

1st. List bills discounted or compare with discount tickler and prove 
same with general ledger. 

2d. Any bills discounted that are away for acceptance, collection, 
etc. , must be proved by letter, care to be used to see that all have been 
actually sent as some may have been ordered back, prepaid, etc. 

3d. Report all collateral loans not covered by required margin. 

4th. Report all past-due paper. 

5th. If special deposits are held on discount desk carefully compare 
same with list and see that proper receipts have been taken for any 
delivered. 

6th. Carefully list and report any securities which are not held as 
special deposits or collateral to loans. 

?th. Report any and all collateral that you are unable to find 
quotations for. 

8th. Select certain calculations made by the Discount Clerk during 
a period of three months before the examination and see if correct. 

GENERAL BOOK-KEEPER. 

* 1st. Proof shall be taken of general ledger. 

2d. Count and prove all bonds, stocks and mortgages on hand called 
for by the ledger. If any be away verify by correspondence. 

3d. Examine United States Treasurer's duplicate receipt of bonds to 
secure circulation and United States deposits. 

4th. Write reserve agent and all correspondents to advise the chief 
examiner at his address the balance due the bank at close of business 
on date of examination. Upon receipt of same careful reconcilement 
should be made. 

5th. Examine current expenses, taxes paid and premium account 
and see that no irregular entries have been made. 

6th. The account with the Treasurer of the United States to be 
proved by his letters of advice. 

7th. Scrutinize the various earnings accounts and see that there are 
no improper entries. 

8th. Prove the circulation received from Washington. 

9th. Carefully prove the individual deposits, which can be verified 
from the other Examiners' report. 

10th. Certificates of deposit should be proved from the Certificate- 
book and register. 

11th. Carefully verify certified account. 

12th. List and prove Cashier's checks outstanding. 

I have tried to make these instructions cover as fully as possible the 
business of small banks as well as large ones. 



INSIDE WORKINGS OP A BANK. 



451 



It must be remembered, as stated at the outset, that this examination 
is from an officer's point of view, and if your force of clerks outside of 
the departments to be examined is not large enough to make a whole- 
sale examination, you can readily take up one department at a time 
which will answer every purpose. 

The system may not be perfect, but it serves the excellent purpose 
of acquainting clerks with departments other than their own, and gives 
them an experience that will be of great value to them as well as to the 
bank, and if well paid they will not be loth to do the work. 

Many points have probably been omitted from the instructions that 
should be covered, as the writer's purpose is to open up the subject of 
Bank Examinations from an officer's point of view. 

Following will be found one or two specimen reports, as handed in 
by the Examiners. Reports upon other departments can be made in 
something of the same style, but it is hardly worth while to burden 
the reader with too many of them. 

REPORT ON BOOK-KEEPERS' DEPARTMENT. 

William Goode, Esq., Cashier. 
Dear Sir : 

This is to certify that I have made a list of balances of accounts in the individual 
ledgers at close of business December, 20, 1890, and as a result have discovered discrepancies 
in 132 accounts catised by errors as follows : 
79 errors in striking balances. 
§4 errors in posting. 

19 errors in xoriting in deposit-tickets and checks. 

These having been rectified the overdrafts were proved, and the total of deposits was 
found to agree with the amount called for by the general ledger on above date, viz., 

$ Respectfully submitted, Clifford Waterman, Examiner. 

REPORT ON TELLERS' DEPARTMENT. 
William Goode, Esq., Cashier. 
Dear Sir : 

In pursuance of instructions received from you, we have carefully counted the 
cash and examined all items carried as cash by fhe Tellers at the close of business on the 20th 
inst., and submit the following report: 

FIRST TELLER'S DEPARTMENT. 



Counter Checks $17,111 76 

Items charged to Third 

Teller 3,956 52 

Clearing-House debit this 

day 67,144 23 

Cash on hand 1.039,909 47 



$1,128,121 98 



Cash at close of business 

yesterday $1,065,305 25 

Received from Second 

Teller 32,675 17 

Received from Third 

Teller 4,141 20 

Received from Treasurer 

United States 26,000 00 

Second Teller short 36 

$1,128,121 98 



First Teller carries as cash memorandum tickets as follows: 

Deposited in Safe Deposit Company vault, silver $8,730 00 

[This was verified by visiting vault and counting money.] 

Special deposit of United States gold certificates with reserve agent 150,000 00 

[Accompanied by letter from said bank which has been verified by us.] 
Petty disbursements 5 18 



452 



PRACTICAL BANKING. 



SECOND TELLER'S DEPARTMENT. 



Checks on this bank $7,512 85 

Charged Third Teller 13 25 

Exchanges 105,006 47 

City office 3,898 49 

Foreign office 6,901 58 

Cash 18,948 19 

Short ._. 38 

,281 21 



Deposits this day $108,545 09 

Received from Third Teller 33,736 12 



$142,281 21 



THIRD TELLER'S DEPARTMENT. 



Cash $804 33 

Exchanges for 26.306 71 

City office 1,132 97 

foreign office 813 65 

Cash items 1.550 00 

$30,607 66 



Sundry credits. . 



.$30,607 66 



$30,607 66 



We have also examined all collections connected with the desk including notes, 
dividends, coupons and unpaid coupons that are past due, and found them to 
agree with the books of the bank. 

RECAPITULA TION. 



Cash, First Teller. . 

Cash, Second Teller. 

Cash, Third Teller. . 

Exchanges for 

Second Teller 

Third Teller .... 

City office : 

Second Teller 

Third Teller .... 

Foreign office : 

Second Teller . . . 
Third Teller.... 

Cash items 



Total cash 

Deficiency 

Cash as per general ledger. 



,039,909 47 

18,948 19 

804 33 



105,006 47 
26.306 71 


3,898 49 
1.132 97 


6,901 58 
813 65 



$1,059,661 99 



131,313 18 



5,031 46 



,715 23 
,550 00 



$1,205,271 86 
38 



$1,205,272 



Tours respectfully, 

Daniel B Hallock, Chairman. 

Drake, Rennie, Waterman and Kennedy, 



Committee. 



TELLERS' DIFFERENCES. 

Question : ' ' What is the best method of keeping an accurate and 
satisfactory record of Tellers' differences V 

Answer : Theoretically, there should be no differences. All entries 
on the books of a bank should be correct, every credit should be 
represented by the same amount of debit, and the Tellers should 
always pay and receive the proper amount of money; but while this is 
true in theory, practically it is never done, and there is not a bank that 
does not have more or less differences. 

All differences should be immediately reported to the officers. No 
Teller, having a difference in his cash, should be allowed to close up 
for the night until every known method of finding the error has been 



INSIDE WORKINGS OF A BANK. 453 

exhausted. No Book-keeper or clerk on any desk where differences 
occur should let them run for any length of time without making every 
effort to find them. 

It is not the purpose of the writer to give a set of rules for finding 
differences — that must be left to the individual bank officer; but many 
differences occur which are never found, and some method should be 
used to keep an accurate and satisfactory record of them. 

In many banks the officers look after small leaks and keep the strings 
tied in a hard knot ; in others, things are allowed to go at loose ends 
without a thought of the consequences, one of the loose ends being 
"Tellers' differences." 

In some banks the Teller holds aside all "overs, 1 ' and takes from 
the amount any ' * shorts, " no record of them being kept. When the 
"shorts" exceed the "overs," a ticket is generally carried in his cash. 
This system cannot be condemned too strongly, as it places temptation 
in the way of a Teller to use money which does not show in his cash, 
and if his expenses are heavier than usual or his family ill, he may 
borrow and ' ' forget " to return the money, which opens the way for a 
man who is not dishonest to use money belonging to others, and thus 
begins a downward course. 

Dishonesty among bank clerks is the exception and not the rule, 
but officers should be on the alert to keep temptation as far away from 
them as possible. 

If we investigate the defalcations that have occurred during the last 
ten years, we will hardly find a thief who, at first, deliberately stole a 
large amount of money. He probably began by taking a small sum, 
quieting his conscience by saying it was only a temporary loan, which 
he would pay soon ; but it turned out to be the old story — he could not 
repay the amount, went from bad to worse, and finally stole all that he 
could lay his hands on. 

Other banks keep a ledger account called ' ' Difference Account, " to 
which they charge and credit all differences. At the end of the year 
they can generally tell whether the "overs " exceed the "shorts," but I 
doubt very much whether they can tell which desk has had the most 
differences or given any proper statistics relating to the same. This 
method is better than the previous one, but does not answer the question. 

Two ordinary ledger sheets should be ruled in the manner shown 
on the following pages, 454 and 455 (see Forms 91 and 92). 

In the system illustrated on pages 454 and 455 an accurate record is 
made of every difference, no matter how small, and the officers are 
thus enabled to trace and know when and on what desk they occurred. 

An account should be opened in the Individual Ledger called ' 'Overs 
and Shorts," to which every shortage should be charged and every 
"over" credited. Charges and credits to this account should state 
clearly the date of difference, on what desk it occurred, and any other 
necessary particulars. When correcting the whole or part of a differ- 



454 



PRACTICAL BANKIXG. 



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INSIDE WORKINGS OF A BANK. 



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456 PRACTICAL BANKING. 

•ence, the date and particulars of the original error should be clearly 
stated. 

One page is for the "shorts," the other for the "overs." In many 
respects the two correspond, there being in each a column for "date," 
"date of difference," "date of correction," "first Teller," "second 
Teller," "third Teller," and "exchanges." On the "shorts" page 
there are also columns marked "debit balance," "credit," and "date 
of short," which correspond respectively to "credit balance," "debit," 
and " date of over" on the "overs " page. 

These columns are used as follows : The ones marked ' ' date " are 
ior date of entry; "date of difference," when the difference occurred; 
"date of correction," subsequent date when the difference (or any part 
of it) was found; " first Teller, " " second Teller, " "third Teller," and 
"exchanges," are used for entering differences occurring on these 
desks. 

On the "shorts" page "debit balance" shows total amount of 
"shorts," to which is added every "short" posted in any of the four 
columns, "first Teller," "second Teller," "third Teller," and "ex- 
changes." The column "credit" is for the purpose of crediting when 
iound, any previous difference (or part) by deducting same from 
.amount of "debit balance." "Date of short" is used in connection 
with " credit" column and refers to date of old "short." 

By referring to the diagram (see Form 92) it appears that on 
October 2d the second Teller was short $2. This difference was found 
October 10th, and the amount is noted in "credit" column and 
-deducted from previous "debit balance," the date of " short " October 
2d being opposite. Also will be noticed, opposite the date October 2d 
in "date of correction," the date when the difference was found. 

On the "overs" page "credit balance" shows total amount of 
""overs, "to which is added every "over" posted in any of the four 
■columns, "first Teller," "second Teller," "third Teller," and "ex- 
changes." The column "debit" is for the purpose of debiting when 
found, any previous difference (or part) by deducting same from 
"credit balance." "Date of over " is used in connection with " debit " 
column and refers to the date of old ' ' over. " 

It will be seen that on October 4th the first Teller was over $2 (see 
Porm 91). This "over" was found October 15th, and the amount is 
noted in ' ' debit " column and deducted from previous ' ' credit balance, " 
the date of ' ' over " being noted before it. Also will be noticed opposite 
the date October 4th, in " date of correction," the date when the over 
was found. 

The difference between the total of "debit balance" and "credit 
balance" is the amount of present "short" or "over," which, as 
noticed in the diagrams, is $7.33 " short" (see pages 454 and 455). 

If this system is faithfully carried out, at the close of each year a 
careful memorandum can be made of all differences that have occurred, 



INSIDE WORKINGS OF A BANK. 



457 



showing whether there is an excess of " overs " or "shorts," as in the 
following : 



First Teller. . . 
Second Teller. 
Third Teller., 
Exchanges. . . 



Overs. 
Shorts, 

Overs. 
Shorts, 

Overs. 
Shorts, 

Overs. 
Shorts 



i Excess of 
Shorts. 



$138 00 

122 27 


69 08 
45 74 


8 97 
11 12 


12 93 

13 94 



2 15 



1 01 



$3 16 



Excess op 
Overs. 



$15 73 



23 34 



$39 07 



NUMBER OF ERRORS. 



First Teller. 



Second Teller. 



Third Teller. . 
Fourth Teller. 




14 
5 


19 


19 
35 


54 


4 
6 


10 


26 
33 


59 



This system can be altered or amended to suit the needs of different 
banks ; if followed out it goes far toward solving a difficult problem. 

DEPOSITORS' ACCOUNTS. 

Question : ' ' What is the best method of keeping them ? " 

Answer : It is not the purpose of the writer to propose an infallible 
system for keeping depositors' accounts but to discuss the general 
principles that underlie all good systems. 

The same general laws govern the conduct of banks with depositors 
all over the country, but the management varies according to location, 
and an officer in selecting a method for keeping accounts of depositors 
must be guided largely by the situation of his bank and the class of 
business it expects to do. 

A bank in a country town with few depositors would not require 
the system used by a bank in a small city, and a bank in the latter 
would hardly expect to use the elaborate system necessary in a large 
financial centre. 

A bank whose accounts consist chiefly of other banks must devise a 
system very different from that of a bank having no accounts of that 



458 PRACTICAL BANKING. 

nature. A bank whose dealers are mostly mercantile people who draw 
a moderate amount of checks, need not have so elaborate a system as a 
bank having private q^d ladies' accounts on which large numbers of 
checks are drawn and information is being constantly required. A 
bank in Chicago or San Francisco will find it difficult to use the system 
pursued by a New York bank, even if the depositors are of the same 
class ; therefore it follows that each officer must study the best system 
and select the one most adapted to his business. 

There are three general principles which can be laid down in 
selecting a proper method for keeping depositors' accounts: 

1st. — The system must be absolutely correct and one which will 
facilitate the proving of the accounts by the clerks. Officers often 
forget that the only way many customers come in contact with their 
institution is through the medium of their accounts, and there is 
nothing so annoying to a customer as to have his account kept in a 
loose manner and to have errors constantly occurring. More accounts 
are probably lost to banks through errors in the deposit ledgers than 
in other ways, and any institution which has a poor method of keeping 
these accounts does not stand much chance of success. It makes very 
little difference to the depositor how inaccurately other books of the 
bank are kept or whether the handwriting is legible; he judges its 
business methods largely by the way his pass-book is balanced and his 
account handled. 

2d. — The system should be one in which every known method is 
used for the protection of the bank against defalcation or collusion by 
a clerk with an outsider. Here is a point where the best of systems 
will fail if not carefully watched, and one way to prevent anything of 
the kind is to change the book-keepers from time to time and pursue 
the system of bank examinations mentioned on another page. 

3d. — The best system should show in some way a complete history 
of each depositor's account. George Rae, in the " Country Banker," 
says : "A man's bank account will not necessarily disclose what he is 
worth, but its entries will serve as tracks to indicate with some degree 
of clearness the line of progress along which he is moving towards either 
failure or success. Your customers are unconscious diarists of a portion 
of their lives. Every account in your books is a record more or less 
graphic of the financial history and progress of the customer contributed 
by himself," and the bank officer should see that this history is plainly 
written. 

Depositors drawing on to-day's deposit should be reported to the 
officers, as in one sense the customer doing this overdraws his account, 
not having had the money to his credit when the check was drawn. 

The officers should also be informed of all customers drawing on the 
previous day's deposits in order to prevent "kiting," which is generally 
done by weak customers, and your system should show this at a glance. 

Accounts should also be kept in a way that will enable the officers 



INSIDE WORKINGS OP A BANK. 459 

to have a careful average made of the balances. In many banks this is 
not done on account of the time and labor necessary, but if officers 
could only realize the importance of having a correct average of the 
account of every depositor, month by month and year by year, from 
which they could gather a large number of valuable statistics, it would 
show them in many cases whether they were making or losing money. 

The method of averaging an account is simple. Banks connected 
with Clearing-Houses have only to deduct the exchanges from the 
depositor's balance of that morning and add the different balances 
together, dividing by the actual number of working days in the month, 
to show the depositor's average for that month. In cities where there 
are no Clearing-Houses this principle can be carried out by deducting 
the checks paid that day, but drawn previously. 

A system which appears to cover all these points would embrace 
the old-fashioned dealers' ledgers, in which the postings are made from 
the books after having been written in by check clerks, combined 
with the balance ledgers (or skeleton ledgers, as they are sometimes 
called), to which the postings are made from the deposit tickets and 
checks themselves, a proof of every account being taken each day. 
Pass-books can be balanced on the dealers' ledgers, and when each 
book has been written up a careful comparison should be made with 
the balance ledger, and at least once a month every account should be 
called back between the two ledgers. The balance ledger will show 
exactly the condition of the account at the close of each day, and a 
careful average of the same can be made. The dealers' ledger will 
show the other part of the history. 

This system of course necessitates the keeping of a double force of 
book-keepers, but where there is a large number of accounts, many 
having similar names, a system of this kind is a good preventive against 
error, but the ledger-keepers of both classes should be changed from 
time to time and careful examinations made. 

JOURNAL ENTRIES vs. CHARGE TICKETS. 

Entries on the books of a bank may be divided into several classes : 

1st. Those made directly from customers' checks and deposit 
tickets. 

2d. Such as are made directly from the mail. 

3d. Miscellaneous class of entries for which the bank always has 
vouchers of some kind. 

4th. Entries which are not represented by vouchers. To this last 
class more particular reference is made on another page. 

In speaking of journal entries I refer to the system in vogue in 
some banks where clerks enter directly on the books, without any 
memoranda, various charges and credits, which are not seen by the 
officers. 

It has been argued in favor of this system that a bank officer can 
make a careful examination each day of every journal entry. I admit 



460 PRACTICAL BANKING. 

that this can be done, but you are making a clerk of the officer and are 
paying a high-priced man for doing work which under a different system 
could be done by clerks equally as well. 

Just here is one of the chief mistakes of the day in banking circles. 
Bank officers are doing a large amount of detail work which, if properly 
systematized, could be handled by others. An officer is chosen to a 
position that he may direct the affairs of the institution. He is sup- 
posed to have certain capabilities that other men do not possess ; to be 
a man of executive ability and to handle and place men in positions 
where they can do the best work, and in general he is the directing 
power of the bank. Notwithstanding all this, there are too many 
officers who Eire wasting time over unimportant matters which, by 
a little careful thought, could be delegated to the clerks who would do 
it much better because their minds are perfectly free and clear from 
other business matters. An officer should be able to find among his 
iorce of clerks from one to a dozen men (according to the size of the 
institution) who can attend to certain matters of detail better than 
himself, and it should be his province and good generalship to select 
men for that particular class of work. This would relieve his shoulders 
of many burdens, keep his mind free for large matters and enable him 
to grasp the reins of the whole bank and drive it to success. 

There is altogether too much petty jealousy among bank officers, of 
men below them. It may be truthfully said that any competent 
officer need have no fear of a first-class man coming up behind him if 
he wisely directs him, as that man will always contribute to his success 
and the more first-class men there are growing up around him the more 
successful he and his bank will be. The word * ' jealousy " should be 
stricken out of a good bank officer's dictionary and he should so culti- 
vate the acquaintance of his men as to bring out their best qualities in 
order that they may all contribute to his success as an officer. This 
may seem a digression from the subject but many bank men contend 
that an officer can overlook journal entries, but a system should be 
provided which will answer the same purpose without the officer per- 
forming the duties of a mere clerk. Too many officers are to-day acting 
as Discount Clerks, Tellers, Book-keepers, etc., in large banks, whereas 
if affairs were managed properly the bank would take a new tease of 
life and the officers could in turn devote their time to the best interests 
of the institution. 

In the use of charge tickets there is a much better system than 
that based on journal entries. The clerks should be instructed to make 
out a charge ticket for every irregular entry which, bearing the signature 
of the maker and embodying an explanation of the entry, should be 
handed to one of the officers for his initial. By requiring each clerk to 
make out charge tickets correcting his own errors, and having him present 
them to an officer to be initialed, he is brought face to face with the 
error which often has a good effect and tends to make him more careful ; 



INSIDE WORKINGS OF A BANK. 461 

and it would also prevent the making of tickets to correct supposed 
errors which do not exist. A ticket should never be entered without 
having been initialed. The officer should also be handed any advice 
or statement pertaining to or showing a reason for the entry. In the 
case of advice of credit by an out-of-town correspondent the advice 
should always accompany the ticket, to enable the officer to see that 
no irregular charges have been made. The officer can thus see at a 
glance the reason for the entry and can pass upon it immediately. A 
large number of defalcations have been concealed by making irregular 
charges in correspondents' accounts whereas if a system of this kind 
had been used it would not have been likely to occur. 

The officers should never make out a charge ticket themselves and 
that fact should be clearly understood throughout the bank. 

With the use of charge tickets every entry should have something 
to show for it. A careful system of calling off and checking back the 
entries of each day's work should be arranged, in which the man 
who makes the entries should not be allowed to call back. Clerks 
calling should be instructed to check every entry and report to the 
officers any that do not have a proper voucher, or any charge ticket 
not signed by an officer. After the books have been carefully called 
back and checked the man calling should sign his name first and the 
one looking on, second, thus preserving a record of the parties checking 
the work. The men writing in and footing the books should be 
instructed to bring down the footings in ink and sign before each footing 
at the close of the day's work, and in carrying a footing from one book 
to another the party making the transfer should place his signature 
before it. The chief clerk should have careful instructions to see that 
all the books are properly signed, footings brought down and signatures 
attached within twenty-four hours; in this way some one is held 
responsible for every entry on the books of the bank, and all the 
irregular entries are presented to the officers through charge tickets 
with explanations which should be carefully written on the books to 
show in posting that they are charge tickets and not regular entries. 
This system can be carried out in large as well as small banks and will 
be found to work admirably. 

WHAT IS THE BEST METHOD OP OPENING LEDGERS? 

There is nothing more disagreeable to the average bank officer than 
to be informed that it is necessary to open a new Ledger. It is a very 
serious question in some banks, especially where the volume of business 
is so great that the entire time of the Book-keeper is occupied in 
posting and handling each day's transactions. The mere thought of 
opening a new Ledger suggests late hours, and consequently, as with 
all difficult matters, it is put off until the last moment. 

One of the first rules to be laid down in regard to opening Ledgers 
is that a careful survey of the old Ledger should be made by the Book- 
keeper and he should note how fast it is being used up. A new 



4G2 PRACTICAL BANKING. 

Ledger should be ordered at least six months in advance of the date 
for opening, thus giving ample time for the proper seasoning of tjie 
book, which is of great importance to a book receiving the hard usage 
that a bank Ledger does from day to day. 

In ordering a Ledger economy should not be considered. The book 
should be well bound, of the best paper, and after giving the matter 
careful consideration and trial, I am prepared to recommend using a 
patent back, which will allow the book to be opened freely : even with 
this, every fifth or sixth page should be strengthened with linen strips. 

The longer a Ledger can be made to run without confusing the 
accounts the better it is for the bank and Book-keeper, as it can be 
used for reference for a greater length of time, and it saves handling a 
large number of books. Bank Ledgers should never be destroyed, 
consequently they should be strengthened in every possible manner, 
and great care used in their manufacture and construction. 

Many banks are to-day using the old style of ruling on Ledgers, 
with debit and credit columns on one page; but by investigation it 
will be found that a Ledger, ruled as the sample shown herewith, with 
double rulings on a page and lines close together, will answer every 
purpose and make it possible to use the book twice as long as the 
ordinary Ledger. The sample gives one-half of a page in width, and 
the depth may be the full length of the paper. (See Form 93.) 

After a Ledger has been ordered and well seasoned, and is ready 
for use, the question arises : How can an overworked Book-keeper (or 
one who is not overworked) open it to the best advantage ? 

The system I am about to outline, which was first originated by 
Mr. Frank Dean, the Assistant Cashier of The Fifth Avenue Bank, of 
New York, enables the Book-keeper himself to open the Ledger in a 
careful, systematic way, taking plenty of time to do it ; and, if over- 
worked, it gives an officer the opportunity to afford him assistance 
without interfering with the regular work of the bank. 

To facilitate comparison of accounts in banks where Balance, as 
well as Individual Ledgers, are kept, the names on both Ledgers should 
run as nearly alike as possible, and at least a month before opening the 
Ledger the Balance-Ledger keepers should be requested to carefully 
rearrange their accounts alphabetically and according to the*proper 
vowels, and charge out to "Unclaimed Balances "all accounts which 
have become inactive and have reduced balances. A list of these 
accounts charged out should be given to one of the officers, which will 
enable him to see what accounts are doing less business, and, if neces- 
sary, make inquiry and learn why they are not active. After the 
accounts have been rearranged the names should be copied into a 
carefully prepared vowel index, which should be ordered with the 
Ledger. In banks where no Balance Ledgers are kept the same process 
may be used in handling the old Ledgers. 

After the names have been copied into the index, the question arises, 



Form 93. Sample ledger Ruling. 




INSIDE WORKINGS OF A BANK. 



463 



How long is it expected that the new Ledger will run, and how many 
pages shall be allowed to each account considering that they will use 
the same number in proportion that they have heretofore ? Provide 
space for new accounts and have them all run evenly and thus fill up 
the Ledger with as little transferring as possible. 

We should now take the old Ledger and ascertain the length of time 
it has been used and estimate the number of pages each account will 
require in the new Ledger, noting same in pencil in front of the name in 
the index. After this process has been completed, add the number of 
pages allowed for the accounts in each vowel, then prepare a diagram 
as below (see Form 94) [which is prepared on a basis of an A to C, 1500 
page, Ledger], and enter the number of pages allowed for each vowel. 





a 


e 


i 


O 


u 


y 


Totals. 


A 


60 


100 


55 


40 


25 


10 


290 


B 


110 


140 


96 


103 


80 


30 


559 


C 

Total No. of pages 
for accounts 


79 


93 


52 


60 


24 


11 


319 


249 


333 


203 


203 


129 


51 


1168 



Form 94. 

On the diagram shown there is a total of 290 accounts in "A" 
divided among the vowels ; " B, " 559 ; " C, " 319 ; making a total of 1,168 
open accounts. The footing of the accounts is proven by both vertical 
and horizontal addition of totals, which should always be done or one 
may be thrown out on the general result. Deduct the whole number 
of pages allowed to the accounts on the index from the total number 
of pages in the Ledger, and you ascertain the number of pages to be 
distributed among the vowels. In the illustration there are 332 extra 
pages ; (1500-1168 = 332), therefore that number of pages is to be divided 
equally among the different vowels. To find the number of pages 
to be allotted after each vowel divide decimally the total of extra 
pages by the total of pages allowed for the accounts, as follows: 
332 -- 1168 = . 2842 +. Now multiply this quotient by the total number 
of pages allowed for each vowel, and the result, as per diagram below 
(see Form 95), gives the number of extra pages to each vowel; these 
totals are also proved vertically and horizontally, which is of impor- 
tance. Of course, in figuring decimally, one may be obliged, on 
account of fractions, to allot a few extra pages to the larger vowels to 
make the scheme prove, deducting them from another vowel. 

After you have carefully schemed out the number of pages, as in 
Form 95, add the total allowed in your estimate to the total of extra 
pages for "A," and the result gives the page on which that letter 
should end, in this case p. 373. Letter "B " should commence on the 



464 



PRACTICAL BANKING. 



following page and end on page 1,091. "C" should commence on 
page 1,092 and continue to the end of the Ledger. After this has been 
done enter in ink opposite each name in the index the number of the 
page on which the account is to commence, keeping a tally by adding 



A 


17 


28 


16 


12 


7 


3 


83 


B 


81 


40 


27 


29 


23 


9 


159 


c 


22 


26 


15 


17 


7 


3 


90 


Total No. of extra 
'pages 


70 


94 


58 


58 


37 


15 


332 



Form 95. 

to the page number the number of pages allowed for the account in 
question as per your pencil memoranda. Proceed carefully through 
the index, proving each vowel by adding the total allowed for that 
vowel to the previous footing, thus: 

Total number of pages allowed for "Aa," as per scheme 60 

(Last "Aa" should be entered on page 60.) 

Extra pages allowed for "Aa" % 17 

(Therefore the first "Ae" should be on page 78.) 77 

Total number of pages allowed for "Ae" 100 

(Last " Ae" should be entered on page 177.) 

Extra pages allowed for "Ae" 28 

Consequently the first "Ai" should be on page 206. 205 

And thus proceed through the entire index. Any differences should 
be corrected, and each letter should end on the page previously 
determined upon. 

The principal part of the work of opening the Ledger has now been 
accomplished. The Book-keeper who has charge of the Ledger or one 
of the other clerks can take the index as prepared and insert the 
Ledger headings, always being assured that he will come out right in 
the end. The pages allowed for the accounts will thus run as long as 
the Ledger is in use and as nearly even as mathematical precision can 
make them. 

In heading a Ledger use good, black ink, writing a large, bold hand. 

In using a double-ruled Ledger, as per diagram, one page, of course, 
is equal to two of the old style, and the Book-keeper should be able to 
turn to the accounts which are written on the lower part of the page 
as readily as though he were using an account for each page ; and as 
most Ledger-keepers ; ' thumb up " with the right hand, opening and 
turning to the right, it is a good plan to put on the upper left-hand 
corner, writing small, with blue ink, the names of accounts on the left- 
hand page and those of the right-hand page in red ; thus the Book- 
keeper will be enabled to turn to them without delay. 

After the index has been prepared and the Ledger headings entered 
you are ready to transfer the balances. For a month previous to the 
time of opening, the Book-keeper should keep the old Ledger footed as 



INSIDE WORKINGS OF A BANK. 465 

close as possible. A rubber stamp should be prepared bearing the date 
upon which the new Ledger is to be opened, and reading say thus : 
1890. 
"Aug. 1. Bal. trans, fr. Led. No. 20." 
which should be carefully stamped on each account in the new Ledger.. 
On the last day of the month all the accounts in the old Ledger should, 
be footed and next day's postings should be entered in the new Ledger. 
From day to day the Book-keeper should strike the balances on the old. 
Ledger and transfer them to the new one, at the same time making a. 
note of the names and amounts in a separate book. After all have; 
been transferred, carefully compare with the Balance Ledger, if one is in 
use, correct all differences and prove the Ledger, signing and handing- 
the proof to one of the officers. In large banks it should be a rule 
that balances should be transferred to the new Ledger and the same 
proved not later than thirty days from date of opening, and this will 
not work any hardship on the Book-keeper. 

In the work before outlined it will be noticed that it can be done by - 
the Book-keeper or taken out of his hands after the index has been 
prepared, and the balance of the work can be done by any clerk in the 
bank. This is of great importance in large institutions where a Book- 
keeper's position is no sinecure. 

After the Ledger has been opened three months, the officer having 
the matter in charge should have a careful list prepared of all depositors: 
whose pass-books have not been balanced within that time. He should 
cause a personal letter to be written, signed by himself, which will have 
the desired effect of bringing in the outstanding books ; thus he will 
have the satisfaction of knowing that the bank work has been carried 
up to date and all vouchers have been returned to the owners. 

HOW TO HANDLE STOPPED CHECKS. 

Morse says : * ' A check is simply a written order of a depositor to his; 
bank to make a certain payment ; it is executory, and as such it is of 
course revocable at any time before the bank has paid or committed 
itself to pay it. The bank is the drawer's agent ; its primary duty is to 
hold or pay his money as he directs. Primarily it owes no duty to the 
holder except under and by virtue of directions from the drawer until 
by reason of these directions it has assumed voluntary or by action of 
law has involuntarily come under secondary and superseding obliga- 
tions to the holder. The latest orders from the drawer govern its right 
to act on his behalf." 

This being the case there is hardly a bank that has not more or less 
trouble with ' ' orders " from depositors to stop payment of checks, and 
if there is any one thing needing careful attention it is a system which 
will rigidly guard against the payment of such stopped checks. A 
large bank with three or four Tellers is more liable to mistakes of this 
kind than an institution where all the checks pass under the eyes of 
one or two Tellers. The first thing to be provided is a proper stopped. 



466 PRACTICAL BANKING. 

payment blank, and for the sake of convenience, a form is given. (see 
Form 96), to be used when a duplicate check or draft is to be issued 
and the original stopped. 



189 



THE RESERVE NATIONAL BANK, 

Of the City of Netv York. 
Gentlemen : 

Please take note that we have this day issued 

Duplicate of our Draft No. _ „ 

dated , 189 , to order of 

J for 

$ .-,, the Original thereof not having been 

paid according to your account current last ren- 
dered to , 189 . 

Please refuse payment on Original of the above 
described draft 

Yours respectfully, 



TO OUR CORRESPONDENTS: 

Please exercise care in examination of accounts rendered, as Dupli- 
cates will only be paid upon receipt of above notice of their issue. 

In issuing- Duplicates, please make them of the same tenor and date 
as the Original, writing the word "Duplicate" and date of this order 
•across the face. Respectfully, 

Form 96. JOHN H. SMITH, Cashier. 

It will be noticed that two good points are secured by this blank, 
viz. : correspondents or depositors are obliged to note that they have 
■carefully examined their account currents or pass-books and that the 
original check has not been paid. A very common mistake has often 
been made by depositors neglecting to thoroughly examine their 
. vouchers before issuing an order for stoppage, and many complications 
have thereby arisen. Another point is covered by the dating of the 
duplicate draft or check which in all cases must agree with the date of 
the order. This prevents a dishonest person from using a check upon 
which payment has been stopped by writing ' ' duplicate " across its face, 
Though seemingly of slight importance, many banks have been swindled 
extensively in this manner, but by using this simple device you have a 



INSIDE WORKINGS OF A BANK. 467 

preventive, as a swindler would not be likely to know the date of the 
order stopping the check. 

Upon receipt of an order to stop payment of a check the Paying- 
Teller should be notified at once and the other Tellers immediately 
thereafter, as very often stoppage orders are given hurriedly and no 
delay should occur in putting the notice in the Tellers' hands. An 
instance will illustrate this point : Some time ago a large firm having 
its headquarters in a Western city, failed. Most of the business was 
transacted through the New York partner, and a few days before the 
assignment the firm negotiated a large amount of single-name paper, 
the proceeds of which remained in the hands of the note brokers. The 
latter accidentally came down to their office a little earlier than usual 
on the morning of the failure and found waiting at the door the New 
York partner of the firm who stated that he desired a check for the 
proceeds of the notes. The brokers thought the circumstance rather 
strange but as there was nothing to excite suspicion a check was given. 
He had not been gone from the ofiice more than fifteen minutes before 
the brokers received a telegram from the West announcing the suspen- 
sion of the firm; it then lacked ten minutes of ten o'clock. A member 
of the brokerage firm ran immediately to the bank, reaching it within 
two minutes of ten o'clock, ordered the stoppage of their check and 
handed the same to the Cashier who delayed a few minutes before 
sending to the Paying-Teller. When the latter was notified, the Cashier 
was told that the partner of the suspended firm had been waiting on 
the line, and the moment the Paying-Teller's window was opened at ten 
o'clock had had the check certified. As the order to stop the check 
was in the hands of the Cashier before the certification was made, it 
was an open question whether the bank was not liable for the amount. 
This only illustrates how promptly orders for stopped checks should 
be handled and that they should have precedence over all other orders. 

After the Tellers have been notified and memoranda taken, the 
order for stoppage should be handed to the Check-Clerk, who should 
examine the vouchers of the depositor to see if the check has already 
been paid, and he should write across the face of the order a notice to 
that effect or that the check has not been paid, signing his name with 
the date. The order should then go to the general Book-keeper who 
should note in a book kept for the purpose a full description as to date, 
payee, etc. , also the date of the order for stoppage. In each of the 
Tellers' departments a list should be kept of all checks stopped, 
arranged alphabetically for ready reference. These lists should only 
contain checks stopped within the previous three months, and the 
Tellers should be instructed not to pay any checks dated before that 
period without looking them up in the stopped-check book to see if 
there is anything noted against them. The Book-keepers should also 
be provided with copies of the same lists, for the purpose of examining 
the exchange from the Clearing-House. In some banks where it is 



468 PRACTICAL BANKING. 

deemed advisable to relieve the Book-keepers of this duty, a special 
man is delegated to examine the exchanges for stopped checks ; this 
can also be done in the Exchange Teller's department, if one is con- 
nected with the bank, but it will divide the work and fix responsibility 
to have it attended to by the Book-keepers. 

After all has been said the old adage remains good, that ' ' eternal 
vigilance " on the part of all concerned is the price of safety, when you 
are looking out for stopped checks. 



LAWFUL MONET RESERVE OF NATIONAL BANKS. 



CHAPTER XXIX. 

LAWFUL-MONEY RESERVE OF NATIONAL BANKS. 

The law now regulating the reserves which National banks are 
required to keep on hand to protect their deposits, is found in sections 
5,191, 5,192 and 5,195 of the Revised Statutes of the United States as 
modified by section 2 and part of section 3 of the Act of June 20, 1874, 
and by sections 1 and 2 of the Act of March 3, 1887. 

The text of these sections, including methods of computation and 
description of funds available for reserve under the law, is as follows : 

[U. S. REVISED STATUTES.] 

(Sec. 5191.) Every National banking association in either of the following cities, 
Albany, Baltimore, Boston, Cincinnati, Chicago, Cleveland, Detroit, Louisville, Mil- 
waukee, New Orleans, New York, Philadelphia, Pittsburgh, Saint Louis, San Francisco, 
and Washington, shall at all times have on hand, in lawful money of the United States, 
an amount equal to at least twenty-five per centum of the aggregate amount of its 
notes in circulation and its deposits ; and every other association shall at all times have 
on hand, in lawful money of the United States, an amount equal to at least fifteen per 
centum of the aggregate amount of its notes in circulation, and of its deposits. When- 
ever the lawful money of any association in any of the cities named shall be below the 
amount of twenty-five per centum of its circulation and deposits, and whenever the 
lawful money of any other association shall be below fifteen per centum of its circulation 
and deposits, such association shall not increase its liabilities by making any new loans 
or discounts otherwise than by discounting or purchasing bills of exchange payable at 
sight, nor make any dividend of its profits until the required proportion, between the 
aggregate amount of its outstanding notes of circulation and deposits and its lawful 
money of the United States, has been restored. And the Comptroller of the Currency 
may notify any association, whose lawful-money reserve shall be below the amount 
above required to be kept on hand, to make good such reserve ; and if such association 
shall fail for thirty days thereafter so to make good its reserve of lawful money, the 
Comptroller may, with the concurrence of the Secretary of the Treasury, appoint a 
receiver to wind up the business of the association, as provided in section fifty-two 
hundred and thirty-four. 

(Sec. 5192.) Three-fifths of the reserve of fifteen per centum required by the pre- 
ceding section to be kept, may consist of balances due to an association, available for 
the redemption of its circulating notes, from associations approved by the Comptroller 
of the Currency, organized under the act of June 3d, eighteen hundred and sixty-four, 
or under this title, and doing business in the cities of Albany, Baltimore, Boston, 
Charleston, Chicago, Cincinnati, Cleveland, Detroit, Louisville, Milwaukee, New 
Orleans, New York, Philadelphia, Pittsburgh, Richmond, Saint Louis, San Francisco 
and Washington. Clearing-House certificates, representing specie or lawful money 
specially deposited for the purpose, of any Clearing-House association, shall also 
be deemed to be lawful money in the possession of any association belonging to 
such Clearing-House, holding and owning such certificate, within the preceding 
section. 

(Sec. 5195.) Each association organized in any of the cities named in section fifty-one 



470 PRACTICAL BANKING. 

hundred and ninety-one shall select, subject to the approval of the Comptroller of the 
Currency, an association in the city of New York, at which it will redeem its circulating 
notes at par ; and may keep one-half of its lawful-money reserve in cash deposits in 
the city of New York. But the foregoing provisions shall not apply to associations 
organized and located in the city of San Francisco for the purpose of issuing notes 
payable in gold. Each association organized within the cities named, shall select, 
subject to the approval of the Comptroller, an association in either of the cities 
named, at which it will redeem its circulating notes at par. The Comptroller shall 
give public notice of the names of the associations selected, at which redemptions 
are to be made by the respective associations, and of any change that may be made 
of the association at which the notes of any association are redeemed. Whenever any 
association fails either to make the selection or to redeem its notes as aforesaid, the 
Comptroller of the Currency may, upon receiving satisfactory evidence thereof, appoint 
a receiver in the manner provided for in section fifty-two hundred and thirty-four, 
to wind up its affairs. But this section shall not relieve any association from its liability 
to redeem its circulating notes at its own counter, at par, in lawful money on demand. 

[ACT OF JUNE 20, 1874.] 

Sec. 2. That section thirty-one of the "National bank act" be so amended that 
the several associations therein provided for shall not hereafter be required to keep on 
hand any amount of money whatever by reason of the amount of their respective 
circulations ; but the moneys required by said section to be kept at all times on hand 
shall be determined by the amount of deposits in all respects, as provided for in the 
said section. 

Sec. 3. That every association organized, or to be organized, under the provisions 
of the said act, and of the several acts amendatory thereof, shall at all times keep and 
have on deposit in the treasury of the United States, in lawful money of the United 
States, a sum equal to five per centum of its circulation, to be held and used for the 
redemption of such circulation ; which sum shall be counted as a part of its lawful 
reserve, as provided in section two of this act. 

REQUIREMENTS TO BECOME RESERVE CITIES. 
[ACT OF MARCH 3, 1887.] 

Sec. 1. That whenever three-fourths in number of the National banks located in 
any city of the United States having a population of fifty thousand people shall make 
application to the Comptroller of the Currency in writing, asking that the name of 
the city in which such banks are located shall be added to the cities named in sections 
fifty-one hundred and ninety-one and fifty-one hundred and ninety-two of the Revised 
Statutes, the Comptroller shall have authority to grant such a request, and every bank 
located in such city shall at all times thereafter have on hand, in lawful money of the 
United States, an amount equal to at least twenty-five per centum of its deposits, as 
provided in sections fifty-one hundred and ninety-one and fifty-one hundred and 
ninety-five of the Revised Statutes. 

Sec. 2. That whenever three-fourths in number of the National banks located in 
any city of the United States having a population of two hundred thousand people 
shall make application to the Comptroller of the Currency in writing, asking that such 
city may be a central reserve city like the city of New York, in which one-half of the 
lawful money reserve of the National banks located in other reserve cities may be 
deposited, as provided in section fifty-one hundred and ninety-five of the Revised 
Statutes, the Comptroller shall have authority, with the approval of the Secretary of 
the Treasury, to grant such request, and every bank located in such city shall at all 
times thereafter have on hand, in lawful money of the United States, twenty-five per 
centum of its deposits, as provided in section fifty-one hundred and ninety-one of the 
Revised Statutes. 

It will be seen that section 5191 names sixteen cities (to which the 
names of Kansas City, St. Joseph, Mo., and Omaha, Neb., have since 



LAWFUL - MONEY RESERVE OP NATIONAL BANKS. 471 

been added under the provisions of the act of March 3, 1887), each 
bank located in any one of which is required to have on hand at all 
times lawful money of the United States, equal at least to 25 per cent, 
of the aggregate amount of its circulation and deposits ; and that each 
bank located elsewhere than in the cities named is required to have on 
hand lawful money at least equal to 15 per cent, of its aggregate 
circulation and deposits. We have thus at once banks of two classes, 
25 per cent, banks and 15 per cent, banks. 

That the words on hand in this section do not mean in the bank 
itself — in its own vault or till — maybe seen from sections 5192 and 5195. 
Section 5192 provides that three-fifths of the reserve which 15 per cent, 
banks are required to keep may consist of balances, available for 
redemption of circulating notes, due to the association from National 
associations approved by the Comptroller of the Currency, located in 
any of the sixteen cities named, the other two-fifths being in bank. 
Section 5195 provides that 25 per cent, banks outside of New York 
may each keep one-half of their lawful reserve in a National bank 
approved by the Comptroller located in New York city. The provisions 
in the sections quoted having reference to the redemption of circula- 
ting notes of National banks at redemption agencies in New York 
and other reserve cities have been repealed by sections 1 and 2 of 
the act of June 20, 1874, quoted, leaving still in force the right to keep 
a certain portion of their required reserve with banks in those cities. 
Sections 1 and 2 of the Act mentioned also repeal all provisions requir- 
ing reserve on circulating notes, except in the case of gold banks. * 

Instead of reserve on circulation, each National back is required to 
keep at all times with the Treasurer of the United States, in lawful 
money, a sum equal to 5 per cent, of its circulation. This five per 
cent, fund is also permitted to be counted as a portion of the reserve 
on deposits. The 25 per cent, banks are divided into two classes: 
those in New York, Chicago and St. Louis and those in the other 
reserve cities. 

In New York, Chicago and St. Louis the required reserve is 25 per 
cent, of deposits, all of which must be in bank. 

In the other reserve cities the required reserve is also 25 per cent, of 
deposits, only one-half or 123^ per cent, of which need be kept in bank, 
the remaining 12^ per cent, can be deposited in New York with ap- 
proved reserve agents. 

Outside of New York, Chicago and St. Louis and the other reserve 
cities the reserve is 15 per cent, of deposits, two-fifths to be kept in 
bank and three-fifths in New York, or in any of the other reserve 
cities. 

These various percentages must be computed on the aggregate 
deposits, that is, on all deposits which appear on the balanced state- 
ment of the bank. It is very doubtful whether National banks have 
* Gold banks obsolete. 



472 PRACTICAL BANKING. 

power either to take time deposits or to borrow money and create bills 

payable. At all events it is believed that whatever agreement may be 

made with a depositor or party from whom money is received on time, 

or borrowed, the bank would be obliged to pay on demand if the other 

parties did not choose to adhere to their agreement. For this reason 

all time deposits or bills payable reported by National banks are held 

to require a reserve the same as other deposits. 

Deposits are divided, for the purposes of computing reserve, into 

two classes, viz. : Bank deposits — that is amounts due to banks — in one 

<?lass, and all other deposits in the other. Certain deductions are 

allowed from«the gross deposits. First, checks in exchanges can be 

deducted from deposits of any class ; but, second, amounts due from 

banks can only be deducted from amounts due to banks, and this must 

"be particularly noted, t In a bank belonging to or dealing through a 

Clearing-House, the Clearing-House exchanges are the only checks 

which can properly be deducted from deposits, but in a bank located 

where there is no Clearing-House it is allowable to reduce the deposits 

by checks on banks in same town or city. If banks desired to have 

checks on banks in same place allowed as a deduction, such checks 

must be separated in the schedule of checks and cash items on the 

back of the report. 

RESERVE IN BANK. 

The funds available for reserve in bank are comprised under the 
general term, lawful money, which has been held to mean gold and 
silver coin of the United States and legal-tender notes. By special 
.Statute, Clearing-House Certificates are available for reserve (Section 
5192, R. S.) In the same way are available United States gold and 
silver certificates (Section 12 of Act July 12, 1882) and United States 
certificates of deposit of legal-tender notes (Section 5193, Revised 
Statutes) and Treasury notes of the Act of July 14, 1890. There were 
formerly many other forms of certificates and Treasury notes available 
as reserve under various Statutes. These are, however, now obsolete. 
All the forms in which reserve may now be kept have been mentioned. 
Some of these obsolete forms were the compound interest notes, 7-30 
notes, three per cent, certificates, etc. 

RESERVE OUTSIDE OF BANK. 

"With the 15 per cent, banks an amount with an approved reserve 
agent in any reserve city equal to but not exceeding three-fifths of the 
total reserve required, is available for reserves. With 25 per cent, 
banks, not located in New York city, an amount with an approved 
Teserve agent not exceeding one-half of the total reserve required, is 
available for reserve. 

The 5 per cent, fund, to an amount not exceeding 5 per cent, of the 
circulation of the bank, is allowed to protect deposits. In the twenty- 
five per cent, banks it will protect 4 times, and in the fifteen per cent. 
t The allowance of any deduction whatever is a ruling of the Comptroller's office. 



LAWFUL -MONEY RESERVE OF NATIONAL BANKS. 



473 



"banks 6 2-3 times its own amount of deposits. In all computations 
given hereafter allowance is made at these rates for this fund. No 
amount with the Treasurer of the United States in excess of 5 per cent, 
of circulation can count as reserve. 

BLANK REPOKT. 

On page 474 is printed the form of blank sent to National banks by 
the Comptroller of the Currency, to enable them to make the reports 
required by law. 

In this blank the items used in computing reserve have been dis- 
tinguished in the printing. The items of deposits on the Cr. side 
have been printed in small capitals, as well as the items of deduc- 
tions on the Dr. side. The items available for reserve have been 
printed in italics. An inspection of this blank will show, at a glance, 
all items upon which reserve is required, those which are allowed 
as deductions, and those which are treated as available for reserve, in 
the computations made in the office of the Comptroller of the Currency. 

The computations divide themselves naturally into the three 
classes already indicated : 

1st.— Twenty-five per cent, banks in New York, Chicago and St. Louis, where 
all reserve, with the exception of the Five per cent. Kedemption Fund, is 
kept in bank. Under this head but one example is necessary. 

2d. — Twenty-five per cent, banks in other reserve cities. To illustrate the com- 
putation of reserve for this class of banks, four examples will be given. 

3d.— Fifteen per cent, banks. The method of computing the reserves of banks 
of this class will also be illustrated by four examples. 

Schedules relating to lawful money reserve which accompany the 
Report, as made up for the Comptroller of the Currency : 

BALANCES DUE FBOM OB. TO APPBOVED BESEBVE AGENTS. 
FBOM— TO— 



Enter Name and 
Location of Bank. 



Amount. 



Enter Name and 
Location of Bank. 



Amount. 



CHECKS AND OTHEB CASH ITEMS. 



Checks and drafts on 1 
banks, &c in this city. ) 

Checks and drafts on 1 

OTHER BANKS f 

































AVEBAGE BESEBVE AND 1NTEBEST. 

Average reserve for last 30 days (in bank and with reserve agents) was 

per cent, of deposits and bank balances. 
The highest rate of interest paid by the bank on Deposits is per cent., 

on Money Borrowed is per cent. 



474 



PRACTICAL BANKING. 



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LAWFUL - MONEY RESERVE OP NATIONAL BANKS. 475 

RESERVE OF NATIONAL BANKS LOCATED IN NEW YORK, CHICAGO 

AND ST. LOUIS. 

There is very little intricacy in the method of determining the 
necessary reserve of these banks. 

All that is necessary to be required must be kept in bank, or in the 
regular 5 per cent, redemption fund, and the difficulties arising from 
a division into reserve with reserve agents and reserve at home do 
not occur. 

The rule is as follows : 

Rule. — Deduct amounts due from banks from amounts due to the same, and also 
deduct exchanges for Clearing-House and bills of other National banks from all 
other deposits, add together the results of the subtractions and deduct from the sum 
four times the five per cent, redemption fund. Twenty-five per cent of the remainder 
is the required reserve which must all be in bank, in one of the forms of lawful 
money or certificates available for reserve, heretofore described. If amounts due 
from banks equal or exceed amounts due to the same, both amounts are omitted 
from the computation. 

The figures, in Report No. 1 on page 476, represent the balance sheet 
of a bank in one of the three central reserve cities either the cities of 
New York, Chicago or St. Louis. 

REPORT NO. 1. 

The computation of the reserve for the state of facts shown in this 
statement is given below : 

Dividends unpaid (item 6, Cr.) $24,375 

Individual deposits (item 7, Cr.; 13,712,616 

Demand certificates of deposit (item 8, Cr.) 200,245 

Certified checks (item 10, Cr.) 544,344 

Cashier's checks outstanding (item 11, Cr.) 58,805 

$14,540,385 

Deduct exchanges for C. H. (item 16, Dr.) $1,904,173 

Deduct bills of National banks (item 17, Dr.). . . . 179,000 2,083,173 

■ $12,457,212 

Due to banks and bankers (items 14-15, Cr.) $2,601,054 

Deduct due from the same (items 8-9, Dr.) 1,625,788 975,266 

Total deposits requiring reserve $13,432,478 

5 per cent. Redemption Fund (item 22, Dr.), $22,500, pro- 
tects four times its own amount 90,000 

Remainder $13,521,478 

25 per cent, of remainder equals reserve required $3,335,619 

all of which must be in bank. 

The bank held— Specie (item 19, Dr.) $3,697,886 

Legal-tender notes (item 20, Dr.) 489,925 4,187,811 

Excess of reserve held $852,192 

It will be noticed that the amounts due to banks largely exceed 
the amounts due from the same. If this condition were reversed, and 
the amounts due from banks had been the larger, the only change in 
the computation would be to omit amounts due to and from banks 



476 



PRACTICAL BANKING. 




LAWFUL -MONEY RESERVE OF NATIONAL BANKS. 477 

altogether. The computation would then be like that shown in the 
following table : 

Sum of deposits other than due to banks after deducting exchanges. . $12,457,212 
5 per cent. Redemption Fund, $22,500, protects four times its amount 90,000 

Remainder $12,367,212 



25 per cent, of remainder is reserve required $3,091,803 

Reserve held 4,187,811 



Excess of reserve i $1,096,008 

RESERVE OF NATIONAL BANKS LOCATED IN RESERVE CITIES 
OTHER THAN NEW YORK, CHICAGO AND ST. LOUIS. 

It is only necessary to repeat that the total required reserve in 
these banks is 25 per cent, of net deposits. One-half of this 25 per 
cent, may be kept with approved reserve agents in the cities of New 
York, Chicago or St. Louis ; the remaining half being required to be 
kept in bank. 

The figures given in Report No. 2, on page 478, represent the balance 
sheet of a bank of this class, showing a deficiency both in the reserve 
at home and in that with reserve agents. 

REPORT NO. 2. 

The computation of reserve on these figures is as follows : 

Dividends unpaid (item 6, Cr.) $8 

Individual deposits (item 7, Cr.) 864,899 

Demand certificates of deposit (item 8, Cr.) 27,834 

Certified checks (item 10, Cr.) 24,379 



$917,120 

Deduct exchanges (item 16, Dr.) $37,314 

Deduct bills of National banks (item 17, Dr.) 3,663 40,977 



$876,143 

Amount due to banks and bankers (items 14-15, Cr.) $874,055 

Deduct amounts due from same (items 8-9, Dr.) 71,738 802,317 



Total amount reqiring reserve $1,678,460 

5 per cent. Redemption Fund (item 22, Dr.), $11,250, protects four times 

its own amount 45,000 



Remainder requiring reserve $1,633,460 



25 per cent, of remainder is 408,365 



One-half of which may be with reserve agents $204,183 

There was with reserve agents (item 7, Dr.) 186,757 



Deficiency with reserve agents $17,426 

One-half must be in bank $204,183 

There was in bank— Specie (item 19, Dr.) $175,558 

Legal-tender notes (item 20, Dr.). 20,050 195,608 



Deficiency in bank 8,575 



Total deficiency »*♦«•.«♦♦♦* * « $26,001 



478 



PRACTICAL BANKING. 



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LAWFUL -MOXEY RESERVE OF NATIONAL BAJN T KS. 479 

The next balance sheet given is that of a bank in a reserve city 
(see Report No. 3, page 480) having an amount with reserve agents 
greater than one-half of the total reserve required, the home reserve 
being at the same time deficient. The object in this instance is to use 
as much of the balance with reserve agents as can be legally counted 
as reserve, and at the same time employ the excess, which cannot be 
counted as reserve, to offset and reduce bank deposits. 

REPORT NO. 3. 

It can be seen at a glance that this bank has amounts due to 
banks much greater than the amounts due from banks. A preliminary 
calculation will show that one-half of the reserve required on 
deposits is much less than the amount due from reserve agents. Thus 
roughly there are about $1,400,000 of deposits (items 6, 7, 8, 9, 11, 12, 
14, 15, Cr.) after deducting due from banks and Clearing-House 
exchanges (items 8, 9 and 16, Dr.). One-hali of 25 per cent, of this sum 
(§175,000) is all that can be counted as reserve with reserve agents, 
with which the bank has §210,000 (item 7, Dr.) or an excess of about 
§35, 000. It can also be seen at a glance that this excess is not suffi- 
cient to offset the excess due to banks (items 14 and 15, Cr.) over amount 
due from banks (items 8 and 9, Dr.). It is under such circumstances 
that what is known as the two -sevenths rule applies. In order to 
understand the necessity for and application of this rule, as well as 
the principles on which it is based, it may be prefaced that it is a short 
method of arriving at true reserve which can only otherwise be deter- 
mined by a long and tedious calculation. In order to easier understand 
the rule mentioned this longer method will first be given. The report 
shows the following items of deposits, etc. : 

Dividends unpaid (item 6, Cr.) $80 

Deposits (item 7, Cr.) 1,114,081 

U. S. Deposits (item 12, Cr.) 75,000 

$1,189,161 

Deduct exchanges (item 16, Dr.) $69,220 

Deduct bills of National banks (item 17, Dr.) 3,000 72,220 

$1,116,941 

The Five per cent. Fund ($11,250, item 22, Dr.), protects of above 

four times its own amount 45,000 

Leaving $1,071,941 

Due to banks and bankers (items 14-15, Cr.) 6254,898 

Deduct due from same (items 8-9, Dr.) 63,589 191,309 

Deposits requiring reserve $1,263,250 

Thus, after making deductions and allowing for 5 per cent, fund, 
there are stilL-§l, 263, 250 deposits for which reserve must beheld, of 
which §191, 309 are bank deposits not covered or offset by amounts due 
from banks. Twenty-five per cent., or one-fourth of §1,263,250, is the 
total required reserve. One-half of the total reserve, equal to one- 
eighth of §1,263,250, can be counted as available for reserve in the 
hands of reserve agents. The remaining one-eighth must be in bank. 



480 



PRACTICAL BANKING. 



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LAWFUL - MONEY RESERVE OF NATIONAL BANKS. 4811 

One-eighth of $1,263,250 is $157,906, and so much therefore of the sumi 
in reserve agents' hands may now be assumed to be available for reserve. 
The bank has, however, with reserve agents $210,672 (item 7, Dr.), 
or $52,766 more than can be counted as reserve. This excess may now 
be treated as simply due from banks, and deducted from amounts due- 
to banks so long as such amounts exist to be offset. Making the> 
deduction, the deposits requiring reserve are reduced from $1,263,250 to> 
$1, 210, 484. Another difficulty now arises. It has been seen that a sum, 
in the hands of reserve agents equal to one-eighth of the deposits can. 
be counted as reserve. By the first assumption the deposits were placed 
at $1,263,250 and the one-eighth at $157,906. But the deposits have, 
been reduced to $1,210,484, and the one-eighth available with reserve > 
agents must consequently be reduced to $151,311. A further excess of 
$6,595 thus appears, which must also be deducted from deposits, reduc- 
ing them still further and also reducing the amount with reserve agents; 
which can be counted as available for reserve, thus leaving a stilli 
further excess to be again deducted, etc. After repeating this process: 
several times a point will at length be reached when no further deduc- 
tion is necessary. In this instance these repeated excesses and deduc- 
tions are practically as follows. If accurately carried out without 
omitting fractions each excess would be just one eighth of preceding one., 

1st excess $52,766 * 

2d excess 6,595 

3d excess 825 

4th excess 103 

5th excess 13 

6th excess 2 

Total amount to deduct 160,304 

The deposits were $1,263,250' 

Deduct 60,304 

Leaving net deposits requiring reserve $1,202,946 

Twenty-five per cent, of these deposits is $300,736'. 

which is total reserve required. 

One-half of the amount may be with reserve agent 150,368. 

There was with reserve agents (item 7, Dr.) $210,672 

Of which we have used as deduction 60,304 

Leaving the required $150,368;. 

One-half of the total reserve must be in bank $150,368 

The bank held— Specie (item 19, Dr.) $112,579 

Legal-tender notes (item 20, Dr.) 6,921 

U. S. Certificates for L. T. notes (item 21, Dr.) 5,000 $124,500 • 

Deficiency in reserve in bank $25,868 1 

In order to avoid this long and tedious process the two-sevenths rule 
has been invented. 

It has been seen that the $1,263,250 of deposits which formed the 
basis of the preceding computation contained a certain unknown 



482 PRACTICAL BANKING. 

amount which was entitled to be offset by the excess with reserve 
agents. The amount so entitled to be offset was exactly the same as 
the excess with reserve agents. Calling this unknown amount X and 
it appears that the amount $1,263,250 equals eight-eighths of net deposits 
plus X, and also that the amount with reserve agents, viz. : $210,672, 
equals one eighth of net deposits plus X; (for if X, not entitled to 
count as reserve, is taken away, there is left just what is entitled to 
count as reserve, viz : one half of 25 per cent, of, or one-eighth of 
net deposits.) Now, if from $1,263,250 is deducted $210,672, the 
remainder, $1,055,578, equals seven eighths of the net deposits, for one- 
eighth plus X has been taken from eight-eighths plus X, leaving 
seven-eighths. Two-sevenths of seven-eighths of the net deposits is 
the same as 25 per cent, of the net deposits. Hence the two- 
sevenths rule : 

Rule.— After making all the usual deductions, from the remaining deposits deduct 
the whole amount in the hands of reserve agents ; two-sevenths of the remainder 
will be the total reserve, and one-seventh the home reserve required. 

By this rule the computation of the reserve on bank statement 
previously given would be as follows : 

Dividends unpaid (item 6, Cr.) 880 

Deposits (item 7, Cr.) 1,114,081 

U. S. deposits (item 12, Cr.) 75,000 

$1,189,161 

Deduct exchanges $69,220 

Deduct bills of National banks 3,000 72,220 

$1,116,941 

The Five per cent. Fund $11,250, (item 22, Dr.), protects four times 

its own amount 45,000 

Leaving $1,071,941 

Due to banks and bankers (items 14-15, Cr.) $254,898 

Due from banks and bankers (items 8-9, Dr.) 63,589 191,309 

81,263,250 
Deduct amount with reserve agents (item 7, Dr.) 210,672 

Remainder $1,052,578 



Two-sevenths of remainder equal total reserve required 

One-half of which, $150,368, is protected by same amount with reserve agents. 

One-half is home reserve required $150,368 

The bank had in its vaults: 

Specie (item 19, Dr) $112,579 

Legal-tender notes (item 20, Dr.) 6,921 

United States Certificates of Deposit for Legal-tender 

notes (item 21, Dr.) 5,000 124,500 

Deficiency in home reserve $25,86S 

The same result is thus obtained by both methods, but the two- 
sevenths rule does away with much labor. If the excess with reserve 



LAWFUL - MONET RESERVE OF NATIONAL BANKS. 483 

agents had not been thus allowed the deficiency would have been 
$33,406. 

When it is found that the excess with reserve agents and the 
amounts due from banks and bankers together equal or exceed the 
amounts due to banks and bankers it becomes necessary simply to 
throw out bank deposits altogether and proceed as if there were none. 
The following interesting report (see Report No. 4 on page 484) is a 
very intelligent example of this : 

REPORT NO. 4. 

A rough estimate will show at once that there are about $2,500,000 
of deposits after deducting exchanges and bills of National banks, and 
that one-fourth, or twenty-five per cent, of this is $625,000, one-half of 
which is $312,500. 

It will also readily be seen that there is at least $100,000 excess with 
reserve agents and $150,000 due from banks (items 8 and 9, Dr.) which, 
together, much more than offset the amounts (items 14 and 15, Cr.) due 
to banks. This excess due from banks cannot be offset against any 
other class of deposits, and is therefore useless to the bank for any 
purpose of reserve. The amounts due to banks having been wiped out 
by offset, the computation can be reckoned as follows : 

Dividends unpaid (item 6, Cr.) $405 

Individual deposits (item 7, Cr.) 2,572,469 

Demand Certificates of deposit (item 8, Cr.) 2,728 

Certified checks (item 10, Cr.) 4,859 

$2,580,461 

Deduct exchanges (item 16, Dr.) $35,301 

Deduct bills of National banks (item 17, Dr.) 30,305 

$65,6C6 

Deposits requiring reserve. $2,514,855 

Redemption Fund (item 22, Dr.), $13,497 50, will protect four tmes its 

amount 53,990 

Remainder $2,460,865 

Twenty-five per cent, of remainder is required reserve 615,216 

One-half of required reserve is $307,608, and is protected by an equal 
amount in hands of reserve agents (item 7, Dr.) 

One-half of required reserve must be in bank 307,608 

Bank held— Specie (item 19, Dr.) $85,200 

Legal-tender notes (item 20, Dr.) 15,000 

U. S. Certificates for Legal-tender notes (item 

21, Dr.) 210,000 310,200 

Excess in home reserve $2,592 

The previous deficiencies, when existing, have been in that portion 
of the reserve required to be kept in bank. 

The following report (see Report No. 5 on page 485) shows a condition 
of things the reverse of this, where the largest portion of the reserve is 
in bank and the deficiency is in that portion which may be kept with 
reserve agents. It has been seen that no amount in the hands of 



484 



PRACTICAL BANKING. 



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486 PRACTICAL BANKING. 

reserve agents can directly make up for a deficiency in the home 
reserve. 

An excess in home reserve can, on the contrary, always count, since 
if a hank sees fit, it can keep all its reserve in its own vaults. 

REPORT NO. 5. 

The following is the computation for the preceding report : 

Individual deposits (item 7, Cr.) $1,689,939 

Demand certificates of deposit (item 8, Cr.) 31,445 

Cashier's checks (item 11, Cr.) 134,169 

81,855,553 

Deduct exchanges (item 16, Dr.) $280,859 

Deduct bills of National banks (item 17, Dr.) 20,203 301,062 

$1,554,491 

Amounts due to banks (items 14-15, Cr.) $240,168 

Deduct due from banks (items 8-9, Dr.) 237,500 2,668 

Total deposits $1,557,159 

Five per cent. Redemption Fund (item 22, Dr.), $26,995, protects four 

times its own amount 107,980 

Remainder $1,449,179 

25 per cent of remainder is total reserve required 362,294 

One-half of which must be in bank 181,147 

There was in bank — Specie (item 19, Dr.) $57,838 

Legal-tender notes (item 20, Dr.) 162,882 220,720 

Excess in bank 39,573 

One-half of total reserve may be with reserve agents $181,147 

There was with reserve agents (item 7, Dr.) 150,8S3 

Deficiency with reserve agents $30,264 

Offset by excess at home as above 39,573 

Net aggregate excess of reserve $9,309 

RESERVE OF BANKS OUTSIDE OP RESERVE CITIES, OR FIFTEEN 
PER CENT. BANKS. 

The five computations that have heretofore been given in this 
chapter have been based on statements of banks located in reserve 
cities where the reserve required to be kept is 25 per cent, of the net 
deposits. 

The banks located outside the reserve cities are required, as has 
already been stated in this summary, to keep a reserve of 15 per cent, 
only of net deposits, three-fifths in amount of which, at most, may be 
kept with reserve agents, and two-fifths of which, at least, must be 
kept in bank. 

The computations of the reserves of the 15 per cent, banks are the 
same in principle, but the proportions are changed in accordance with 
the different requirements of law. 

The following (see Report No. 6 on page 487) is the report of a 15 



LAWFUL - MONEY RESERVE OP NATIONAL BANKS. 



487 



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488 PRACTICAL BANKING. 

per cent, bank, which shows a deficiency both in home reserve and in 
that with reserve agents. 

REPORT NO. 6. 

The computation of reserve shown by this statement is as follows : 

Dividends unpaid (item 6, Cr.) $000 

^Deposits, individual (item 7, Cr.) 262,251 

Demand certificates of deposit (item 8, Cr.) 4,065 

'Cashier's checks (item 11, Cr.) 583 

United States deposits (item 12, Cr.) 65,519 

1332,418 

Deduct exchanges (item 16, Dr.) $4,799 

Deduct bills of National banks (item 17, Dr.) 1,372 6,171 

$326,247 

IFive per cent. Redemption Fund (item 22, Dr.), $12,375, protects sis 

and two-third times its own amount 82,500 

Remainder $243,747 

Amounts due to banks (items 14-15, Cr.) $164,605 

Amounts due from banks (items 8-9, Dr.) 15,385 $149,220 

Total deposits requiring reserve $392,967 

Tifteen per cent, of above is total reserve required 58,945 

Three-fifths of foregoing amount may be with reserve agents . . $35,367 
• The bank had with reserve agents (item 7, Dr.) 31,027 

Deficiency with reserve agents $4,340 

Two-fifths at least must be in bank $23,578 

'There was in bank— Specie (item 19, Dr.) $20,500 

Legal-tender notes (item 20, Dr.)... 2,000 22,500 

Deficiency in home reserve 1,078 

Total deficiency $5,418 

The next statement (see Report No. 7 on page 489) shows, in the case 
of a 15 per cent, bank, the method of utilizing the excess in the hands 
of reserve agents as an offset against amounts due to banks. The 
method of doing this with banks in reserve cities has already been 
shown under the head of the two-sevenths rule. With 15 per cent. 
banks the principle is the same, but the legal proportions of reserve 
with reserve agents and in bank being different, a different rule is 
required. 

Rule.— After all other deductions have been made, the whole amount with reserve 
agents is to be deducted, and fifteen ninety-firsts of the remainder (instead of two- 
sevenths, as in the case of 25 per cent, banks), is the total reserve required. 

REPORT NO. 7. 

In this report a rough estimate will show that the amounts due 
to banks exceed those due from the same by about $160,000. It 
can also be seen at once that the total deposits after deductions are 
made are about $760,000, 15 per cent, of which, being the total reserve 
required, is about $114,000, and that three-fifths of the latter sum is 
About $69,000. From this it appears that there being $128,063 with 



LAWFUL -MONEY RESERVE OF NATIONAL BANKS. 



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490 PRACTICAL BACKING. 

reserve agents, there is at first sight an excess with these agents of 
about |59,000, which can be deducted from the amount due to banks. 
To do this in the ordinary way would require repeated calculations and 
deductions, as has already been seen when explaining the two-sevenths 
rule. Avoiding this, the result can be obtained at once by following 
the rule last given. • 

Individual deposits (item 7, Cr.) 8602,580 

Demand certificates of deposit (item 8, Cr.) 16,632 $619,212 

Deduct exchanges 15,327 

Deduct bills of National banks 4,009 19,336 

$599,876 
The five per cent. Eedemption Fund ($4,499.40, item 22, Dr.), will 

protect 6 and two-thirds times its own amount 29,996 

Leaving $569,880 

Due to banks and bankers (items 14-15, Cr.) $207,833 

Less due from banks and bankers (items 8-9, Dr.) 39,502 168,331 

$738,211 
Deduct full amount in hands of reserve agents (item 7, Dr.) 128,063 

Remainder $610,148 

Fifteen-ninety-firsts of remainder is the required reserve $100,570 

Three-fifths of required reserve may be with reserve agents 60,342 

(and is protected by equal amount in hands of such agents.) 

Two-fifths of required reserve, at least, must be in bank $40,228 

The bank held— Specie (item 19, Dr.) $6,243 

Legal-tender notes (item 20, Dr.) 17,000 23,243 

Deficiency in home reserve $16,985 

This method for 15 per cent, banks gives, as does the two-sevenths 
rule for 25 per cent, banks, the largest possible deduction for bank 
balances and makes the required reserve as small as possible. 

As in the case of the 25 per cent, banks, so with the 15 per cent, 
banks, when it is evident that amounts due from banks, together with 
the excess with reserve agents, are equal to or exceed the amounts due 
to banks, the latter amounts are omitted from the computation, and 
any excess du.ef?*om banks or reserve agents ceases to be of any avail to 
reduce the required reserve. The following statement illustrates this : 

In demonstrating the two-sevenths rule it was assumed that deposits 
were eight-eighths of net deposits plus X, and that fund with reserve 
agents was one-eighth of net deposits plus X, and by taking one from the 
other, seven-eighths of net deposits were left. So, with the fifteen ninety- 
firsts rule it is found that gross deposits are one hundred one-hundredths 
of net deposits plus X, and that amount with reserve agents is three-fifths 
of fifteen one-hundredths, or nine one-hundredths of net deposits plus X. 
Deducting one from the other leaves ninety-one one-hundredths of net 
deposits; and fifteen ninety-firsts of ninety-one one-hundredths is the 
same as 15 per cent, of one-hundred one-hundredths of the net deposits. 



LAWFUL - MONEY RESERVE OP NATIONAL BANKS. 



491 



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492 PRACTICAL BANKING. 

REPORT NO. 8. 

The deposits roughly estimated are about $187,000, three-fifths of 
15 per cent, of which, or 9 per cent., is $16,830, showing that in the 
$44,509 with reserve agents (item 7, Dr.), there is an excess of about 
$28, 000, which completely offsets the small balance due to banks. The 
computation will then be as follows : 

Dividends unpaid $64 

Individual deposits (item 7, Cr.) 170,604 

Demand certificates of deposit (item 8, Cr.) 10,736 $181,404 

Deduct checks on banks in same town $1,373 

Deduct bills of National banks 2,955 84,328 

~ $177,076 
The five per cent. Redemption Fund will protect 6 and two-thirds its 

own amount 25,000 

Remainder *. $152,076 

15 per cent, of remainder is required reserve 22,811 

Three-fifths of required reserve may be with reserve agent, $13,687, and 
is protected by equal amount in hands of such agent. 

At least two-fifths of required reserve must be in bank $9,125 

There was in bank— Specie (item 19, Dr.) $1,471 

Legal-tender notes (item 20, Dr.) 5,000 6,471 

Deficiency in home reserve $2,654 

REPORT NO. 9. 

The next statement (See No. 9 on page 493) is that of a 15 per cent, 
bank with the largest part of the reserve at home, not having with 
reserve agents the full three-fifths of the total reserve which it is legally 
permitted to keep there. There is no deficiency, however, as the com- 
putation hereafter given will show. This statement also shows bills 
payable, upon which, as has been said, a reserve is required. 

Dividends unpaid (item 6, Cr.) $460 

Individual deposits (item 7, Cr.) 191,359 

Cashier's checks (item 11, Cr.) 2,643 

Bills payable (item 17, Cr.) 20,000 

8214,462 

Deduct bills of National banks 1.320 

8213,142 
Five per cent. Redemption Fund will protect 6 and two-thirds its amount, 60,000 

Remainder 8153.142 

No bank deposits. 

15 per cent, of above is total reserve required 22,971 

Three-fifths of total reserve may be with reserve agents $13,783 

There was with reserve agents (item 7, Dr.) 10,173 

Deficiency with agents 3,610 

Two-fifths of total reserve, at least, must be in bank $9,1S8 

There was in bank— Specie (item 19, Dr.) $1,7S4 

Legal-tender notes (item 20, Dr.) 12,690 14,474 

Excess at home ... 85.286 

Deficiency with reserve agents 3,610 

Excess in total reserve $1,676 



LAWFUL - MONEY RESERVE OF NATIONAL BANKS. 



493 



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494 PRACTICAL BANKING. 

The examples given include all the cases that can arise either in 25 
per cent, or 15 per cent, banks. The figures will vary, but if the principles 
laid down are followed every possible case can readily be worked out. 

AVERAGE RESERVE. 
The average reserve for any given period may be obtained by com- 
puting by the methods heretofore shown, the net deposits requiring 
reserve for each day in that period, and adding the results together for 
a divisor. In the same way the reserves held on the same days 
should be added together for a dividend. The quotient will be the 
percentage of average reserve for the period. 

FIFTEEN PER CENT. BANKS IN RESERVE CITIES. 
There are two or three instances of banks now located in reserve 
cities which are only required to keep a total reserve of 15 per cent. 
This anomaly arises from the fact that when these banks were organ- 
ized they were situated in a suburb which has since been absorbed by 
the growing city. Thus Birmingham was taken into Pittsburgh, Pa. 
The National bank in Birmingham, organized there before that town 
became a part of Pittsburgh, still retains, under a decision of the 
Attorney-General of the United States, the exact status it had at 
organization, and will retain it until its charter expires. Among other 
rights retained is that of keeping a reserve of 15 per cent. only. In the 
same situation are banks in Dorchester, Roxbury and Charlestown, now 
parts of Boston, Mass. , and in Georgetown, now part of Washington, D. C. 

APPROVED RESERVE AGENTS. 

Any bank situated outside of the reserve cities can select any 
National bank within any of such cities as a depositary for its funds, 
and such funds so deposited are, when the selection is approved by the 
Comptroller, allowed to be counted as a part of the required reserve of 
the depositing bank. In the same way banks in reserve cities can 
select for approval banks in New York, Chicago or St. Louis. The 
bank making the selection writes to the Comptroller of the Currency, 
and asks his approval of the chosen bank. The approval is usually 
given, and the necessary entries made in the books of the Comptroller's 
office. The bank is advised that the selection is approved, and 
thenceforth all balances due from this approved bank are counted as 
available for reserve under the law. 

Richmond and Charleston, although named in Section 5192 among 
the cities, wherein 15 per cent, banks are permitted to deposit 
three-fifths of their reserves, are not named in Section 5191, among the 
cities, wherein banks are required to keep the larger reserve of 25 per 
cent. — this larger reserve being principally required because of the 
greater responsibility incurred by receiving the deposit of bank 
reserves. For this reason no banks located in Richmond or Charleston 
have ever been approved as reserve agents by the Comptroller. 

Note.— A facsimile of the Report Blank sent to National banks is shown else- 
where in this volume. See Appendix. 



A CHAPTER ON SIGNATURES. 



495 



CHAPTER XXX. 

*A CHAPTER ON SIGNATURES. 

In the regular course of business bankers sometimes come across 
very queer signatures. The question is sometimes asked — "What's in 
a name?" and, judging from the way some bank officials write their 
names there is a good deal in it in the way of bother before they can 
be made out. For instance, here is the way the Cashier of a National 
bank in Kansas signs : 




His name is W. P. Hazen. Several years ago a premium of a year's 
subscription to Rhodes' Journal op Banking was offered to any one 
who would read the signature and out of several hundred guesses 
received not more than twenty-five were correct. 

The Pacific slope contributes the following remarkable signature 
which is that of C. W. Bush, Cashier of a California bank : 




* The signatures in this chapter are all photographed from the originals. 



496 



PRACTICAL BANKING. 



It hardly seems possible that the following signature is that of 
Carmon Parse, Cashier of a bank in New Jersey, but that is the way 
he writes it : 










A well-known National bank Cashier in Michigan writes his name 
as below, and calls it E. Newell : 



— C 





Below is the signature of Hugh Harbison, Treasurer of a manu- 
facturing company in Connecticut. It ranks high as a curiosity in 
penmanship. Many a bank officer has puzzled his weary brain over it : 




A. CHAPTER ON SIGNATURES. 



497 



The following specimen is given not so much for illegibility 
(although the signature would be puzzling to those not familiar with it) 
as it is to show another style of penmanship adopted by some bankers. 
In the original the form below fills the entire page of a letter sheet 
(reduced to this size by photo-engraving process) and was one used by 
the writer in remitting for collections. The signature is that of Jas. 
V. D. Westf all, formerly a private banker in Western New York : 




This is the way F. S. Watts, Teller of an Iowa bank makes his 
signature. It is characteristic yet fairly legible : 




498 



PRACTICAL BANKING. 



When it comes to constructing a very unique signature, F. C. Miller, 
the Cashier of a Kansas bank, does it in this remarkable style : 




Below is the signature of John Mohr, Jr. , Cashier of a bank in Indiana : 




Here is the signature of R J. B. Crombie, Manager of a Canadian 
bank : 




A CHAPTER ON SIGNATURES. 



499 



The following peculiar composition stands for the name of Lloyd 
Bowers, Cashier of an Arkansas National bank: 




No one could possibly tell whether the following was a man's name 
or a Chinese puzzle, but it is the way H. G. Nolton, formerly Vice- 
President of a New York State bank, signed his letters : 




Tom Randolph, President of a Texas National bank, puts his name 
on the bottom of bank bills in this style : 




It is very doubtful if the average bank clerk could make the fol- 
lowing cob-web read W. D. Mussenden, but that is how the Cashier of 
a down-east bank writes it : 



\7^~, °^% 



^i 




500 



PRACTICAL BANKING. 



By way of contrast the signature of John Johnston, Cashier of the 
Wisconsin Marine & Fire Insurance Co. Bank of Milwaukee, is given. 
As an example of a strong, legible signature, it is an excellent model. 
Experts claim that a plain signature baffles the forger more than one 
difficult to decipher. The signature is that of Mr. Johnston when he 
was Assistant Cashier. Since the death of Alexander Mitchell, former 
President, he has been the Cashier: 




THE END. 



APPENDIX. 

1. Form of Skeleton Ledger; or, Depositors' Daily Balance Book. 

2, Fac-simile of blank on which National Banks report to the Comptroller 

of the Currency. 





MODEL OF THE 














"Skeleton Ledger"; or Depositors' Daily Balance Book. 












For Description, see Page 57. 












Q§mm, /#?#. 


<&w#Mdk% yaw. 4. 


Q////:v////, l/m. s 




^ /////7////< /////. 6. 


1 / 


/ ^ 




/ y 




y 


NAMES. BALANCE. 


Checks in Detail. 


Total Checks. 


Total Credits. Credits in Detail. 


BALANCE. 


Checks in Detail. 


Total Checks. 


Total Credits. Crodils in Detail. 


BALANCE. 


Check! In Di I ro Ill CradlU In Dotall 


Anderson, Peter. 5 871 25 




95 

127 23 
021 


843 


23 


952 29 75 S.C 


5 980 31 


818 
820 

7.000 


7 538 


'• 

l 018 us a.ac. 


589 09 


8,000 




3 280 32 5 000 


Adams, Eve. 


920 


80 

03 75 

21 N7 




194 


62 


1 800 




2 525 38 


a 75 572 88 


i, 

1 500 


3 452 50 




2 875 9 028 7!. in di 




| Henderson, Chas. 18 621 23 






8 721 


dis. 8,721 


27 342 23 


o.ooo 

4,000 


10 000 




17 342 23 








4 800 






Robbins, Winslow. 


300 






50 


475 


100 J. B. & Co. 


125 






8 216 


87 110 . 


8 nil 87 






i 286 80 ''' ; " ,h 




Storrow, A. D. 


5 000 






5 000 








3 000 




3 000 




[00 
880 


2 L50 1 000 > " ' 






Washington, C. E. 


10 891 25 




% 5 353 60 

!il 25 

... 85 


7 500 




7,00(J 


13 037 


6 5 


5, 5 700 






7 337 65 












Total Net Deposits. 


41 003 |73 ; 






11 441 45 


19 448 


39 




49 010 
100 000 


5 7 


23 810 88 


13 734 87 




38 93 1 56 
100 000 






LS LOB 






Notes Discounted. 


87 


■lis. 


8.721 


9 000 


5 600 


5,000 

000 


147 121 87 


12 650 


12,000 
100 
100 




ill 




1 007 


'10 






Discount. 2 721 92 






279 




3 000 92 
6 000 








3 000 92 
6 000 














Expense. 




Mutches 

flold IV 


75 
. 2 25 


3 




| 


928 




iO 
.,, Ill, 5 25 


5 75 




















78 

or. 


20 444 45 25 327 29 


23 816 63 26 384 87 


11 1 12 12 9 =107 40 








9 961 62 


26 384 87 23 816 63 






9 307 


40 14 412 72 




1 


Liabilities. 
Resources. 


149 725 

149 725 




- 


158 Oil 49 
158 Oil 49 




147 935 48 











Fill ALL SCHEDULES, writing in the \ 

SO] 

LOANS ASD DISCOUNTS. 



AttncmAt cm VL S. (©Mali $ 

" *' Uo£», WnAi, oir<jA o«w> LvJUi^al W£u)iLt& ._._...-—....,.. ■ ty . 

Emu, JruiW iwaW\ tuoo o> imoM uuLuiAuol *y. lum nofflu ...... *. . » $ . 

** &Anuvw=mamu ha*>*> low jritA&am e> IxVm \ vidVaul ©»Jke» &«u*ilu .„ ... . $ 

*' LeeuXw Im Uockf., LanvAi, cnvd olKrt WvLcwoJ Ltcu.ivj.ci ...... -. I? 

(t o* r.vixlaac'^ o* oiiu> taaI=tUo)* Ucu.ul-u i 4« ielviluit \ ... .. tp . 



&d. 



Included in the above are— 

«$ao Alii, at AJukA im ©sJUvv D264t, ©V 



U.-X 

liMiitJ omA oauvAuc laoliO . *—«--- 



Enter the amoiu; 
each of these t 
items, or write in 
word " none " if t 
is no amount to ei< 



LOANS Exceeding the Limit Prescribed by Section 5290 of the Revised Statutes, including An 
which Exceed this Limit due from State and Private Banks and Bankers. 



Name of Borrower 



Name of Borrower 





STOCKS, 


SECURITIES, CLAIMS, &c 






Bhares or stock or 
face value of boa da. 


Name of corporation Issuing mock. 


Amount at which 
carried od booka. 


-Estimated aciual 


Stale whether taken for "debts pre 
contracted," or otherwise. 


































































, 













BALANCES DUE FROM OR TO APPROVED RESERVE AGENTS. 
FROM- TO- 




En*, 


name and location of Ban*. 


Amounu 


.Einet name aad location of Bank. 


«» 
















'"" 















-— 


- — " 



















CHECKS AND OTHER CASH ITEMS. 



(5LJ0 o*vA AioHl an lamki, ^c. , «> llu» dl<L. 
i&Ujit ami AxaUi on oBioLwJU 



AVERAGE RESERVE AND INTEREST. 

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a. StS^lL- 




:\T TO NATIONAL BANKS. (Fa< 3nm i '' 



vord "None" wherever no amount is to be entered. 

EEDULBS. 

OVERDRAFTS. 



it in 
itree 
the 
here 
ter. 



counts 



Secwrcd : 
©lonimui \1 maMM o> owl 




Unsecured: 

§U<Un U mJU d «» 




-- 


1 

6 " « 




~ ™"J 


1 u » 




,, 






« \ « " 




] « \ " " 
















T^ 


II 11 " 



OTHER REAL ESTATE AND MORTGAGES OWNED. 



Describe property, 
elate form of conveyance, and 


which carried 
on books. 


property. 
If any. 


Estimated 
of property. 


Date when acquired. 


State whether taken for 

"debts previously contracted," 

or otherwise. 



















































































LOANS AND DISCOUNTS, Secured by Mortgages or 


3ther Real Estate Security. 


Describe property, _ 

state form of conveyance, and 

from whom obtained. 


wblcii carried 


Amount of 
property, 


Estimated 
of property. 


Datej when acquired. 


State whether taken for 

"debts previously contracted,'' 

or otherwise. 



















































































































































































































1 o 
$ ft 



% 



INDEX 



PAGE. 

Abrasion of gold coin 33 

Absences, occasional. 8 

Absent endorsement supplied 251 

Acceptance and return 97 

cancelling acceptance of draft. . 87 

collection of 263 

of draft by attorney 87 

of incorrectly addressed draft. . . 83 

of time drafts by bank 412 

Accepting drafts and naming place 

of payment 85 

Acceptor, a question of spelling. . 415 
Accidental destruction of bonds 

and money 156 

Accommodation paper 140 

signatures 414 

Accounts of unknown persons 277 

Accuracy not assured in telegraph- 
ing 212 

Acknowledgements of accounts 

current 209 

of letters sent 208 

Acknowledging correctness of pass 
books 52 

Additional force for vacation time. 288 

Administrator, opening an account 

with 438 

stock transfers by 186 

Advertising articles found 24 

Advice of checks drawn 240 

Age of bank officers 440 

Agency for making city banks' 

country collections 106 

or branch bank 296 

Agents at Washington 295 

All right, when it was all wrong. . 89 

Alloy in gold coin 30 

Alterations of checks 402 

Altered circulating notes 46 

Alternate payees for checks 238 



PAGE. 

American Bankers' Association , 

auxiliary membership of 6 

Amusements and outside interests 

323,326,442 

Annual meeting of stockholders 

264,373 

Application book and its form 120 

Apprenticeship system in Scotch 

banks 5 

Approval check-mark by Directors 120 

Approved reserve agents 494 

Arguments against position in a 

bank 1 

Arrangement of banking room. . . 340 

Assault upon messengers ! . . . 88 

Assets and liabilities on balance 

sheet 63 

Assistant — gen'l asst. best place for 

young clerk 5 

Association, American Bankers/ 

auxiliary membership 6 

Associations, bank clerks' 325,376 

Assorting and filing paid checks. . 65 
Attendance book of Bank of Eng- 
land 8 

Attorney for the bank 296 

Average reserve 494 

Averaging an account 459 

Balance sheet, when made up 61 

daily use of 61 

forms of 62 

Balancing pass-books monthly 50 

Bank examinations 446 

discount department 450 

general book-keeper 450 

paying-teller's department 448 

receiving-teller's department. . . . 449 

third-teller's department 449 

truenvay to examine banks 447 



AI.I. SCHEDULES, i 



SCHEDULES. 



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OVERDRAFTS 




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OTHER REAl ESTATE AND 



LOANS Exceeding the Linlt Prescribed by Section 5200 of the Revised Statutes, Inc 
which Exceed tills Limit due fro-i State end Private Banks and Bankers. 


iidlng Ara 




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STOCKS. SECURITIES. CLAIMS. «c 




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BALANCES DUE FROM OR 





APPROVED RESERVE A6ENTS. 






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LOANS AND DISCOUN 


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Jther Real Etrtato Security. 




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CHECKS AND OTHER CASH I 



(SU,^iJ 1 i._UUJ....1.j 1 

fiU, .-ll^,..jLUL, 


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504 



INDEX. 



Bank, grammatical use of word. . 415 
use of this title by individuals. . 413 

Bank — inside workings of 446 

Bank of England, attendance book 8 

bullion, its stock of 34 

character of its clerks 8 

clerks' literary association 326 

vacation arrangements 290 

lost or stolen notes of 157,366 

lunch room 294 

medical care of clerks 378 

need of modern methods in 284 

new clerks and salary 5 

notes, their issue and redemption 366 

plan of fidelity insurance 377 

profit on circulation 368 

residences within the 314 

rule for keeping old papers 347 

statement of condition 374 

system of pensions 378,440 

treatment of its employees 377 

Best bankers have passed through 

lower offices 1 

Best position for young clerks 5 

Bills of exchange, different forms of 225 

Bill of sale important 138 

Bills, paying out uncounted 17 

(see Circulating notes) 

Blank report sent to banks by 
Comptroller — facsimile — (in 
appendix.) 
Bonds, accidental destruction of. . 155 

giving personal bonds 335 

moral value of officers' bonds. . . 335 
of indemnityin stock transfersl88, 193 

of suretyship 330 

of suretyship when charter ex- 
tended 338 

stopping payment of 156 

various forms of 153 

Book-keeping, Boston system of . . 58 

Book-keeper, his duties 57 

Books, neat and good forms neces- 
sary 64 

system in ordering 65 

Boston system of book-keeping. . . 57 
Boys, growing custom of taking 

for new clerks 4 

Branch banks 296,445 

Branding counterfeit National 
bank notes 45 



Brokers supplying banks with- r 

paper 119,137 

Bulk of gold in large amounts 29 

Bullion gold at Bank of England. 34 

gold bought and sold 30,34 

Burning redeemed circulation 203 

Business hours in different locali- 
ties 290,44 r 

hours, the legal view 802 

paper, now and formerly. . 139 

Buying all paper offered 122 

and selling paper. 136,137,416 

Calculating time on paper 131 

Canadian banking 444 

Cancelling paid checks. 254 

redeemed circulating notes 200 

stock certificates 180 

Carat as a measure of gold 30 

Care of banking rooms 341 

of collaterals 147 

of locks and keys 343 

of officers' bonds 333 

of old books and papers 346 

of paper money 3'.' 

of stock certificates 181,426 

of. waste paper . . 342 

Carelessness at Teller's desk, anec- 
dote 25 

Cashier, cares and duties of... 161, 173 

commissions offered to 898 

his relations to the clerks 163 

his records and books 166 

signature, importance of 165 

should not have clerical duties . 162 
Caution in exposing dividend list. 177 
Certificate of deposit, in payment 

of check 22 

issue and payment of 243 

issued on time 398 

protest of 400 

Certificate of stock, care of 426 

issue and retirement of 181 

Certification by telegraph 217 

can checkholder demand 15 

not done in England 372 

of a smalL check 15 

of raised check 27 

of unindorsed check 22,252 



INDEX. 



505 



Ce. -ification by telegraph, power 

to certify 15 

prohibited 15 

special forms of 16 

Changing positions of clerks 280 

Charging for expense of small acct. 396 

notes through Clearing 94 

note to makers' account 93,96 

^.arity, a bank's right to give. . 395 
Charge tickets and journal entries . 459 
Check, after death of drawer. . .22,234 

assorting and care of 65 

certification of. . .15,16,22,27,217,252 

chapter on 234 

counter-signing 240 

country checks charged through 

Clearing 361 

crossed cheques in England 368 

drawn against insufficient bal- 
ance 14 

drawn to alternative payees 238 

endorsements on, responsibility 

for 401 

fraudulent alteration of 402 

issue of duplicate 241 

improperly written 239,253 

no grace on checks 235 

not properly endorsed 16,237 

or cheque 415 

payment of unindorsed check. . 22 

payment of part of 14 

receipt for payment of 14 

receiving check for sundry pay- 
ments 96 

return of check charged through 

Clearing 358,360,371 

requiring qualified endorsement 253 

stopping payment of 253 

through Clearing, which to re- 
turn 360,371 

used for Clearing-House settle- 
ments 353 

writing up on slips for depositors 51 

Cipher, an impromptu form 220 

codes, care of 218 

codes, use and value of 214,217 

Circuitous routes for collections. . 104 
Circular note in place of Letter of 

Credit 233 

Circulating notes of Nat'l banks. 37,196 
do do coin values of 38 



Circulating notes lost and destroyed 198 
do do redemption of 37,38, 199 

do do series of 37 

do do their value 37,38 

do do of Great Britain. . . 367 

do do over issue of 200 

do printing signatures on 165 
do do stolen unsigned. . 44, 1 98 
Circulation, burning after redemp- 
tion 203 

keeping it out 196 

of Great Britian, report of 367 

record 196 

returns and taxes 66 

Civility, importance of 305,429 

Clearing-House and the Trust Com- 
panies 380 

collecting notes through 94 

funds and payments 37,353 

loans made at Clearing-House.. 355 

management and rules 354,358 

paying country checks through . 361 
reports to, and published returns 362 

responsibilities 357 

settlement with defaulting bank 358 
time for returning check extend'd 359 

work described. 349 

Cleopatra and ancient gold 29 

Clergymen as financiers 436 

Clerks follow business habits of 

superiors 8 

of bank acting as notary 112 

present and former modes of 

obtaining 4 

well informed clerk of great 

value 6 

Clipped coins 32 

Coins, clipped and mutilated 32 

redemption of worn U. S. coins 36 
standard weights of U. S. coins 35 

test for counterfeit coin 35 

shipment of, to Europe 32,34 

Collateral, handling and care of. . 147 

notes 134 

receipts for delivery of 148 

responsibility for 150 

sale of 135 

time paper as collateral 149 

versus personal security 151 

Collecting interest on demand loans 137 



506 



INDEX. 



Collecting interest on defaulters' 

bonds 334 

through express companies 101 

Collection by special messenger. . . 108 

department 72 

charges under old and new 

methods 101 

contracts 103 

of unusual items 105 

profits and expenses 100 

trip for Suffolk Bank. 358,388 

Collections, by city banks in com- 
bination 106 

filing and recording 75 

from unknown parties 99 

invoice is important 72 

made by failed bank 97 

responsibility for 97 

sent over circuitous routes 104 

Combination of banks for collec- 
tion business 106 

Commissions offered to bank officers 397 

Comptroller's action when bank is 
mismanaged 298 

Condition of the bank 61 

publication of statement of. ..68,374 

Confidence, a business necessity. . 434 
absence of 435 

Consols, the English securities 374 

Conveniences in modern banking. 281 

Co-operation of Cashier and clerks 163 
in Fidelity Insurance 377 

Copying and recording the letters 207 
ink for printed forms 207 

Corporation service, objections to. 2 

Corporation, endorsement by 248 

Correspondence, in care of Cashier 166 
narrow limits of expression in. . 204 

promptness in handling 204,209 

special qualities needed in 205 

to be copied 206 

Counting bills received and paid 
out 17 

Counterfeit circulating notes, brand- 
ing of 45,387 

detection of 44 

Coupons, and interest warrants. .. 154 

listing and collecting 158 

stopping payment of 156 

Courtesy must be in variablc276. 304,429 



Covers for notes ". 73,126 

Credit, and other tickets 125 

of firm difficult to fix 411 

to wrong account 277 

Crops, their influence on bank 
loans 143 

Crossed cheque described 368 

Danger in collecting for strangers 99 

Dealers appreciate varied knowl- 
edge in clerk 86 

Dealing in money 406 

Death among the officers 813 

of check drawer 22 

Debentures and bonds 153 

Debt to bank, note for collection 
is not 17 

Decisions as to collection responsi- 
bilities 98 

Declaring dividends, reserve neces- 
sary 177 

Default of bank in Clearing-House 
settlement *. 358 

Defaulter, conduct of 28 

not to be given charge of funds. 4 

Defalcations and poor management 300 

in Suffolk Bank 385 

resulting in improved methods. 301 

Delivery of bills of lading 92 

of collateral or coupons 149 

of notices 78 

of pass-books 51 

Demand loans of different kindsl35,137 

notes with collateral 134 

notes without mention of interest 400 

Departments, clerks want knowl- 
edge of various departments. . 5 
responsibility to each other 278 

Depositing early in the day 431 

Deposit of valuables 396 

tickets, entries from 48 

tickets, value of 48 

Depositor's account, exposure of. . 399 

pass-books 50 

rates for discounts 133 

Depositors' accounts 457 

how to average an account 459 

principles for properly keeping. 458 

Depositors, at distance, not to have 

pass books 50 



INDEX. 



507 



Depositors, list of 157 

security for 431 

Destruction of redeemed bills 202 

Detecting counterfeit bills 44 

Detectives, the Teller in that ca- 
pacity 25 

Dilatory habit fatal to success 7 

Directors, at clerks' desks 24 

compensation to 272,445 

may prohibit certification 15 

of Savings banks 442 

ownership of stock by 438 

relations to officers 269 

their election and organization. 264 

their selection 118,270 

to be of varied businesses 118 

Disadvantages of clerkship in large 

banks 5 

Disappearance and loss of gold... 29 
Disclaimers of collection responsi- 
bility 98 

on telegraph blanks 215 

Disclosing condition of depositor's 

account 399 

Discount clerk and the loan 118 

clerk and tellers 125 

paper from brokers,. 119, 136, 137, 416 

records 120 

time 132 

Discounting for shareholders 411 

to get circulation out 198 

when reserve is deficient 145 

Dividends, care of dividend list. . . 177 

payment of 176 

reserve to be up when dividends 

declared 177 

Division of labor for safety 280 

Doctor for the bank 277 

Domestic exchange transactions. . 224 

Dollars, what are they 260 

Drafts, chapter on 262 

for collection from strangers. . . 99 

grace on 80 

novel forms of 82 

presentation of 80 

protesting 263 

with bills of lading 84,91 

Drawees, their duties 81 

Drawer for holding paid checks. . 65 
Duplicate checks, issue of 241 



Duties and inter-relation of officers 303 



Early closing Saturdays 291 

rising advised 295 

Economising time 282 

Education of bank officers 6 

Election of Directors 264,373 

Endorse, proper spelling of the 

word 415 

Endorsers and endorsements on 
checks. . .16,22,237,245,253,371,401 
signature, bank's knowledge of. 27 
Endorsement by bank President. . 274 

by Treasurer or company 247 

forged endorsement on checks. . 

100,401 

furnished when absent 251 

guarantee of 248 

of check collector desirable 14 

of check wrongly filled out 245 

of checks, English customs 371 

of drafts by Cashier 88 

of paper by clerks 142 

of paper for acceptance and re- 
turn 97 

qualified endorsement on check . 252 

stamps • 102,246 

England, (see Bank of) 

English action as to marriage of 

clerks 288 

banking profits 374,406 

bank reports, publication of. .70,374 

banks do not certify 372 

coins and bank-note circulation. 365 
co-operative plan of Fidelity In- 
surance 377 

crossed cheques 368 

custom of paying directors 272 

depositor's pass-book 56 

Fidelity Insurance Companies.. 376 

hours of business 292 

Institutes and Associations. . .326,376 

law as to certain acceptances 85 

methods of starting a bank 372 

oaths of secrecy 319 

plan of life insurance for clerks 376 
practice as to cheques and pay- 
ments 370 

public reference libraries 325 



508 



INDEX. 



English safe deposit customs 397 

stockholders' meeting 373 

strong rooms and vaults 345 

Envelopes, special form of 206 

their origin 206 

Entries on pass-books by Teller only 50 

Equity and common law 441 

Erasing an acceptance 87 

Errors in drawing checks 239 

will occur 277,278,332 

Estimate of men from ability, not 

position 3 

Europe, coin shipments to 32,34 

Examination of a bank 446 

Examination of all entries and work 278 
of bank's books by stockholder. 399 

of bank by its manager 446 

of bank reports at Washington. 299 

of discount work 120 

of officers' bonds 333 

Examiner and examinations 297 

Examiners' reports 451 

report on Book-keeper 451 

" " First Teller 451 

" " Second Teller 452 

" " Third Teller 452 

Exchange charges on collections. . 101 
domestic exchange transactions. 224 

its relation to value of gold 38 

sterling exchange transactions. . 223 

Exchanging collaterals 148 

Expenses, bank clerks' necessary. . 286 

ordinary and incidental 282 

Expert testimony on signatures. . . 244 
Express company as collection agt 101 
companies' connection with Suf- 
folk Bank 393 

companies' protest instructions. 114 

package, under-valuation of 159 

Extending time for return of Clear- 

ing-House item 359 

Extension of charter of National 

bank 433 

Extension of charter and officers' 

bonds 337 

Extra help in vacation time 288 

Extemporized trusts 191 

Facts and figures 443 



Failed banks, collection made by 97 

Faithfulness urged 9 

Fac-simile of report blank sent to 

National banks (in appendix.) 
Family, value of , to bank officers . . 10 
Fidelity Companies' methods. .334,336 
companies,English banks' use of 

376,445 

insurance, a co-operative plan . . 377 
Fifteen per cent, banks in reserve 

cities 494 

Figures as to banks and stock- 
holders 444 

Finding money outside of counter 23 

Filing time paper in portfolios 127 

Finance committees 267 

Foreign paper, when to forward. . 133 
Forged endorsement on collected 

check 100 

Forgery prevented 600 

Forging a signature ignorantly . . . 438 
Forgetting points once decided. . . 279 
Form of blank report sent to Nat. 

banks 473 

Form of special examiners' reports 

451,452 

Forwarding maturing paper 133 

Fraudulent business paper 141 

Furnishings of banking room 340 

General balance sheet, when made 

up 61 

daily use of 61 

form of 62 

Gifts of money by bank. 395 

Gold and silver 

disappearance and loss of 29 

quantity of 28 

relative value of 30 

Gold, increased production of 29 

Gold coin, how handled 31,33 

packing and shipment 33,34 

premium on 38 

space required for 29 

standard weights of 35 

sweating, clipping, etc 32 

test for counterfeits 35 

Good nature, its importance 10 

Grace and interest 91 

on bank checks 235,380 



INDEX. 



509 



Grace on coupon and interest 

warrants 154 

Grammatical use of word "bank" 415 
Guarantee companies, English 

banks' use of 376, 445 

companies' methods 334, 336 

given when not needed 275 

of endorsement 248 

Habits of officers followed by- 
clerks 8 

Half -holiday Saturdays 291 

Handling gold coin properly 32 

Handling stopped checks 465 

notice to Paying-Teller. 467 

Handwriting, study and practice in 309 
Healthfulness of bank position. . . 1 
Heredity, to be considered in select- 
ing clerks 4 

Hobbies for leisure hours 2, 317 

Holidays and maturing paper 405 

and receiving the mail 406 

opening the bank on 404 

Homes of bank officers 314 

Honesty and heredity 4 

Hours of business 7, 290 

of business abroad 292, 445 

of business, the legal view 292 

How to compute a bank's reserve. 477 

How to become a reserve city 470 

How to keep depositors' accounts. 457 
Husband's consent to drawing 

balance 372 

consent to stock transfer 195 

Identification and identifiers 17 

English methods in 18, 232, 371 

manufactured and fraudulent.. . 19 
of holder of Letter of Credit. .230, 427 

of stockholder 184 

pass-word for 427 

Identifier, record of 19 

responsibility taken by 20 

Improvement in form of pass- 
books 53 

Improved methods from losses and 
defalcations 300 

In exchange, and ' 'with exchange" 90 

Index book for depositors' ac- 
counts 59 



Index book of collection contracts 105 
Information supplied (advertise- 
ment) 325 

Ink responsibility 401 

Inside workings of a bank 446 

Inspector of branch banks 445 

Institutes, Bankers' Institutes. 325, 376 

Instructions as to protesting 112 

with collections 72 

Insurance by bank for clerks' 

benefit 376 

Investments of bank clerks 314 

Integrity expected in young clerks 4 

Interest, accrues when 400 

accurate 127 

at different rates 130 

on demand loans 137 

rules for calculating 128 

steady accumulation of 426 

tables 131 

upon depositors' balances, 

133, 380, 406 

upon grace 91 

versus principal 422 

warrants, question of grace 154 

Inquiries as to standing of firm. . . 411 
Irrevocable powers of attorney. . . 432 



Joint note, how protested 115 

Journal entries vs. charge tickets. . 459 
entries directly from the mail. . . 459 
entries from checks and deposit 

tickets 459 

entries unrepresented by 

vouchers 459 

how to use charge tickets 461 

miscellaneous entries 461 

Journal, form of 60 

Keeping cancelled vouchers 347 

Keys of vault, care of 345 

Knowledge and information sup- 
plied 325 

Large bank not best for young 

clerk 5 

Lawful money, table of 261 



510 



INDEX. 



Ledgers — best method of opening. 461 

form of ruling bank ledger 462 

bow to determine number pages 

to each account (with diagram) 463 
transferring accts to new ledger. . 465 

Legal and illegal holidays 404 

Legislation on checks of deceased 

drawer 23 

as to lost checks 254 

Leisure time in the bank 307 

hours, uses of 317 

Letter of credit, issue and use of. . 226 
Letters, opening and handling.211, 278 

registering valuable letters 212 

return request on 243 

(see Correspondence) 

Libraries in banks, growth of 6 

for reference by students 325 

what should be included in. . 175 
License issued to foreign executor 188 
Life insurance furnished by bank. . 376 

List of depositors 175 

Listing checks in large daily letter 210 

Living in the bank building 31 1 

Loan, in public statement 68 

on real estate 145 

on shareholders' stock 411 

ten per cent, limitation of 145 

with reference to crops and trade 143 
Loaning between banks at clearing 355 

to put out circulation 198 

Local organizations recommended 

for clerks 6 

Location of banking rooms 339 

Locks, their condition and care. . . 343 

Long and short time paper 143 

firm, what it is 423 

Loss from abrasion of coin 32 

of Letter of Credit 231 

of paper in the mails 98 

Losses but slight in legitimate 
banking 425 

Lost and found property, its 

ownership 23, 151 

checks and their duplicates 241 

letters to be looked up promptly 208 

package of money 393 

paper, and protest of 114 

stock certificates 192 

Lunch room for the bank 294 



Mail and^telegraph 204 

delay in receiving 362 

loss of paper in 98 

receiving mail on illegal holiday 406 

Mailing certificates of stock 183 

dividend checks 177 

the daily letters 21 

Management, some words on 275 

Manager's examination of his bank 446 

use of daily balance sheet 61 

Mark, in place of a signature.. 371, 408 
Marking paper to show ownership 127 

Marksman, an English term 371 

Marriage of bank clerks 287 

of stockholders 194 

Married woman s bank account. . . 372 

Maturing paper, record of 123 

Medical care for the clerks 378 

Meetings of the Directors 267 

Messenger and his duties 79 

as a machine 89 

Metropolitan Bank, N. Y., its re- 
demption business 390 

Military rank, illustrating grades 

in banks 2 

Minute money, one kind of 135 

Misdirected letters, why not re- 
turned 243 

Misunderstandings prevented by 

records 121 

Model, a bank that was not 302 

Modern conveniences in banking.. 281 

ideas and methods 283 

Money articles in newspapers.. 424, 439 

sent by telegraph 218, 222 

Monthly balancing of pass-books . . 50 

memorandum for Cashier 172 

Moods of business men \ 276 

Morning hours, use of 327 

Mutilated paper money 39 

paper money, how redeemed.. 4 1,199 



National banks must receive Nat. 

bank notes 37 

National banks — reserve of 469 

text of law requiring 469 

Neat and good forms for books. . . 64 
New clerks, old and new methods 

of obtaining 4 



INDEX. 



511 



Newspaper quotations for money. 

424, 439 

New York banks, question as to 

reserve 418 

funds bought and sold at clearing 357 

Notarial fees and responsibilities. . Ill 

Notary and protests 109 

(see Protesting) 

Note broker, his responsibility 137 

for collateral loan 134 

paid by mistake ^3 

payable at a bank 94, 261 

payable ' ' in exchange " 90 

Notes, chapter on 256 

errors in form of 258 

negotiability of 259 

protesting 259 

when payable 256 

where payable 261 

with many names 142 

coll'n of, is not rec g payment 

of debts 17 

(see Circulating notes) 

Notices of loss of valuable papers. 114 
of maturing paper sent by de- 
positor 445 

to makers not obligatory 27 

used in collection department . . 76 

Notifying bank of unexpected ab- 



Oath of Directors 265 

of secrecy and faithfulness.. 316, 336 
Objections to bank clerkship.. 1, 2, 320 

Ocean shipments of coin 32,34 

Office and vaults, care of 169 

Officers, every one a subordinate. . 3 

Old books, their preservation 346 

scores settled 441 

Old-time collection methods 100 

One-man bank not a model 119 

Opening new ledger 461 

Opening the mail as received 211 

Organizations, local O. of clerks. . 6 
Out-of bank interests and pleasures 326 
Out-of-door life recommended. . .2, 323 
Out-of-town depositor not to have 

pass-book 50 

Over-drafts under Suffolk Bank 
system 387 



Over-issue of National bank notes 200 
Over-payment of check, anecdote. 27 
Over- work of officers and the bad 

results 284 

"Overs" account — form of 452 

Ownership of articles found 23, 151 

of U. S. National banks 444 

stamped on paper 127 



Packing coin for shipment 34 

Panic, conduct in, anecdote 430 

usual course of 436 

Paper, accommodation paper 140 

business paper now and formerly 138 

buying and selling 135, 137, 416 

on long and short time 143 

with many names 142 

Paralysis, pen 311 

Pass-books, acknowledgment of A 

correctness 52 

balancing and delivery of 51 

entries and care of 50 

English form of 56 

improvements in form 53 

wrong entries in 53 

Pass-word for identification 427 

Paying back money 92 

check to wrong man 25 

check without receiving advice . 241 

cut or cancelled check 255 

dividends 176 

money on telegraphic order 219 

part of a check 14 

unendorsed check 407 

Paying-Teller 

duties and qualifications of 12 

form of book for 13 

his promotion rank 119 

to have new money on hand 40 

Pay-rolls, difficulties in supplying. 17 

Pen paralysis 311 

Pencil signatures 407 

Penmanship, study and practice in 309 

Pensions for retired clerks 378, 395 

Petition for redemption of worn 

coin 36 

of bank officers in 1807 293 

Plain writing prevents forgery . . . 500 
Pleasure in business 321 



512 



INDEX. 



Portfolios for filing notes 127 

Postal cards, advantages of and 

objections to 206, 210 

Potatoes with a draft 83 

Powers of Attorney 

file of, at Clearing-House 410 

for stock transfer 185, 432 

general form of and recording. . 403 

held by acceptor 87 

not expressed in signature'. ..... 408 

irrevocable form, and why it is so 432 
Premium on drafts under Letter 

of Credit 232 

on gold 38 

Presenting drafts 80 

President and Directors 264, 272 

endorsements by 274 

his relations with Cashier 165 

modern aids for 273 

^not to assume all responsibility. 119 

^surety bonds for 330 

who lost his mind 122 

Printing in the bank's books 57 

signatures on circulating notes. . 165 

stationery in copying ink 207 

Private business kept apart from 

bank duties 7 

Probate of will annulled 187 

Production of gold 29 

Profit of English banking 374, 406 

on lost circulation 199, 200 

Prominent bankers once clerks 1 

Promotion declined 319 

not for every deserving clerk. . . 3 
Promotion money, an English cus- 
tom 372 

Promptness in getting through 

work 7 

ministerial, anecdote of 9 

Protested bills shown in baDk 

reports 69 

Protesting a certificate of deposit. . 400 

by person not a Notary 109 

country checks charged through 

clearing 361 

in various cases. . 112,114,259,263,292 
Publication of bank statements. .68,374 
Published rates for money 424 

Qualified acceptance of draft 85 



Qualified endorsement of check... 253 

Queer signatures 495 

Qualities expected in clerks 4, 285 

Raised checks 27, 403 

Rate for different kinds of loans. . 135 

for money as published 424 

of discount noted on record 123 

of discount to depositors 133 

of interest on loans at Clearing. . 357 
Real estate, loans upon, and owner- 
ship of 145 

Receipt by messenger for payments 88 

for collaterals delivered 148 

for paid checks returned 348 

Receipting for payment of checks. 14 

Receiving-Teller, his entries 48 

his qualifications and duties. ... 47 

Record kept by the Cashier 166 

of amount of certain paper 144 

of collaterals and changes 149 

of collection contracts and experi- 
ences 105 

of collection paper 75 

of drafts 73 

of depositors' accounts 59 

of Directors' meetings 267 

of letters received and sent 207 

of maturing paper 123 

of notices delivered 78 

Recording Powers of Attorney 403 

Redemption, Bank of, organized. . 389 
bureau at Washington estab- ■ 

lished 390 

of fraudulently issued bills 201 

of mutilated bills 41, 199 

of National bank notes. 37, 38, 199, 202 

of notes stolen unsigned 44 

of U. S. Treasury notes 37 

of worn coin, petition for 36 

under Suffolk Bank system 384 

through U. S. redemption bureau 202 

Registered bonds and their transfer 155 

mail, safety of 183, 213 

mail, the system of 212 

Regular daily work an advantage. 322 

Relations and duties of the several 
officers 803 

Relative value of gold and silver. . 30 



13 



INDEX. 



513 



Repetition of telegrams 215 

Replies from drawees 80 

Reports and returns, how made up 66 
as published by foreign banks. . 69 

examined at Washington 299 

of circulation in Great Britain. . 367 
of condition and their publica- 
tion 68,374 

to the Clearing-House 362 

Reserve, discounting when it is 

not up 145 

held by Trust Company 380 

kept in neighbor bank 419 

must be up to declare dividend. 177 
small reserve sometimes required 420 

of bank in N. Y. City 418 

of what it may consist 417 

of Trust Companies in banks. . . 381 

Reserve in bank 472 

Reserve outside of bank 472 

Reserve of National banks 469 

what is lawful-money reserve. . . 469 
Reserve of Nat. banks in New 

York, Chicago and St. Louis 475 
Reserve — other cities, how to com- 
pute 477 

of banks outside of reserve cities 486 

the fifteen per cent, rule 488 

the two-sevenths rule , 482 

Residence in bank building 314 

Responsibility for carelessness in 

check-drawing 403 

for Clearing-House transactions. 357 

for safety of collaterals 150 

for collections and agents 97 

for notary Ill 

of note broker 137 

of last endorser for those pre- 
ceding 401 

of telegraph company 215 

on raised checks 27, 403 

Restitution after many years 441 

Retirement from business not al- 
ways wise 323 

of aged bank officers 440 

Return of misdirected letters 243 

Returns, (see Reports.) 
Returning cancelled checks to 

drawers 348, 372 

checks charged through Clear- 
ing 358, 371 



Returning unpaid collections 103 

Rooms, care of 341 

location and furnishing 339 

Routine ways of work 320 

Rules for calculating interest. .127, 128 

for redemption of mutilated 

bills 41, 199 

Rust in clerks 320 

Safe Deposit Vaults abroad 397 

Safety of legitimate banking 425 

Safe-guards against alterations of 

checks 238 

against large issues of paper 144 

against theft of paper 127 

Salaries of officers 285 

Sale of collateral to unpaid notes.. 135 

Saturday early closing 291 

Savings bank management 442 

bank statements 71 

by bank clerks 315 

Scotch system of apprentices in 

banks 5 

Scrap-book for Cashier 175 

Secrets of the bank 315 

Selection of paper by its maturity. 143 
Self-respect, may be maintained. . 3 

Selling bank property 432 

old books and papers 347 

Settlement of estates of stockholders 190 
Settlements between banks in gold, 

anecdote 32 

Shipping coin across the ocean. .32, 34 
Short cash, the Teller's efforts to 

find 26 

"Shorts" account — form of 455 

Signature, a legal signature 407 

by mark 408 

expert testimony on 844 

file of local signatures 409 

great authority of Cashier's sig- 
nature 165 

on Letter of Credit 229 

on petitions or recommendations 414 

peculiarities in 310 

Signatures 495 

blind signatures and plain writ- 
ing 495 

how some bank officers write 
their names 495 



il4 



INDEX. 



Silver certificates 38 

counterfeit coin test 35 

for shipment 34 

standard weight of coins 35 

why fallen in value 31 

Skeleton ledger described 58 

Slips for writing up depositors' 

checks 51 

Small depositors' accounts 396 

Societies of bank clerks 325 

Special deposits of valuables 396 

Speculation by bank officers. .300, 315 
Spelling of some banking terms. . . 415 
Stagnation, a tendency towards. . . 319 
Stamps for collection endorse- 
ments 102 

Stamped endorsements 245 

State banks defined 413 

Statements of discounts and loans. 124 

of condition published 68, 374 

Stationery should be first-class. . . 205 
Statistics as to ownership in Na- 
tional banks 444 

Sterling exchange transactions... 223 

Stimulants for bank officers 294 

Stock certificates by mail 183 

certificates and transfers 179 

in name of dead persons 190 

of National banks, how held. . . 444 

record of issue and retirement. . 181 

Stockholder, what constitutes a. . . 438 

Stockholders changing names 194 

meetings 264, 373 

right to examine bank's books. . . 399 

Stolen bonds, their ownership 157 

Stopped checks 465 

how to handle 465 

form when duplicate is issued. . 466 
importance of notice to paying 

teller 467 

money, whose loss 24 

Stopped notes of Bank of England 

157, 366 
Stopping payment of bonds and 

coupons 156 

of checks 254 

of Letter of Credit 231 

redemption at Suffolk Bank... 387 

Strangers, danger in dealing with. 277 

Strong rooms of English banks. . . 397 

staff needed and why 1 



Study, habit, of study valuable.. . . 325 

Studies for leisure hours 316 

Subordinate positions held by able 
men 3 

Success as bank officer, qualities 

needed 4 

Suffolk Bank and counterfeit 

notes 45, 387 

clerks as counterfeit detectors. 44, 386 

notice of ceasing to redeem 387 

redemption system of 384 

returning bills by messenger 

385, 388, 392 

well-known men of 390 

Sunday work 301 

Supplying an absent endorsement. 251 

Supply of right men for banks 3 

Sweating gold coins 32 

System at the Manager's desk 429 

Tax on circulation 66 

Telegrams in cipher 218 

may be sent by anybody 220 

received after bank hours 215 

received unpaid 216 

repetition of 215 

Telegraph Co. s responsibility 215 

use of the 213, 281 

Tellers' differences 452 

form of "overs" acct 452 

form of "shorts" acct 455 

number of errors 457 

total differences 457 

Teller as a detective 25 

who was short 26 

Ten per cent, limitation of loans. . 145 

Theft of money from counter 24 

Theological views not of first im- 
portance 4 

Three cents, an error of 28 

Tickets for use between clerks 125 

Time, calculating time on paper. . 131 

certificates of deposit 398 

economy of 282 

of day when note due 93 

out of bank 7 

paper as collateral 149 

Transfer of registered bonds 155 

of the stock 184 



INDEX. 



515 



Treasurer, proper endorsement by 247 

Treasury agents for banks 285 

notes, bow printed 42 

rules for redemption of mutilated 
notes 41, 199 

Trust companies, chapter on 379 

company, by-laws and rules 381 

Trustees' accounts properly named 183 

transfers of trustees' stock 186 

without authority 191 

Ultra vires 482 

Undervaluation of express parcels. 159 

U. S. care of old vouchers 349 

treatment of worn coin 32, 35 

Union of banks for collection busi- 
ness 106 

Unpaid collections, letter for 103 

notes, selling the collateral 135 

paper, what to do with 94 

telegrams, how to deal with. ... 216 
Unsigned stolen Nat'l bank notes. 44 

Unusual collection items 105 

Usury and its penalty 416 

Vacation, advantages of 288, 328 

application for 269 

arranging work for 288 



Vacation — special annual vacation 290 

sending word if detained 9 

Vade mecum, the Cashier's 171 

Value of National bank notes 37, 38 

Vaults for customers' use 397 

in custody of Cashier 169 

Vouchers for absent paper 133 

keeping or returning old vouchers 348 

Waiving demand and notice 137 

Wallet, use of by messenger 88 

Waste of materials and time 9 

paper, care of 342 

Watchmen for rooms and vaults. . 345 
Webster, Daniel, anecdote of. ..82, 429 

Weighing gold coin 31 

Well-informed clerks of great value 6 

What " reserve in bank" is 472 

What "reserve outside of bank" is 472 

Will, probate of will annulled 187 

Women employees 421 

of business . . .420, 437 

Work, pleasure in regular work . . 322 
Worse than a defaulter, anecdote. . 428 
Writer's cramp 312 

Yearly and monthly duties 173 

Young men starting in banks 5 



